Rada votes for 2021 budget in first reading

Ukraine’s parliament voted on Nov. 5 to support the
first draft of the 2021 state budget with 275 votes in favor (out of 226 votes
needed). The bill was approved by part of the pro-presidential People’s Servant
faction (209 out of 246 MPs), as well as most of Yulia Tymoshenko’s Fatherland
faction and some non-faction MPs. Meanwhile, pro-Western factions European Solidarity
and Voice, as well as the pro-Putin faction Opposition Platform For Life,
provided no votes for the budget draft.

The 2021 budget draft, prepared by the Finance
Ministry in early September, assumes an increase of planned budget revenue by
10% yoy to UAH 1,071 bln and a rise in expenditures by 5% yoy to UAH 1,331 bln.
The planned budget deficit is UAH 260 bln (11% less yoy), or 6% of expected
GDP. Parliament’s budget committee recommended on Nov. 5 to increase planned
budget revenue by UAH 20 bln (or 1.9%) and boost expenditures by the same
amount.

The first draft’s approval opens the possibility for
Ukraine to continue negotiations with its international financing partners, PM
Denys Shmyhal commented, adding that he is expecting a new round of negotiations
with the IMF, World Bank and the EU in the next week.

Alexander Paraschiy: The plnned
deficit of 6% of GDP does not look compatible with the IMF program, which
assumes next year’s deficit at 5.3%, according to the latest memorandum.
Therefore, it looks like for the rest of 2020, Ukraine will have to conduct
tough negotiations with IFIs on the size of the planned deficit, as well as
hard work in the parliament aimed at limiting budget expenditures.

Also, any fruitful negotiations with the IMF on the
2021 budget parameters must still be accompanied by concrete steps to repair
the recently damaged anti-corruption infrastructure in order to secure any
future loans from IFis.