Parliament amends budget, creates $2.4-billion coronavirus fund

The Ukrainian parliament has passed amendments to the 2020 budget, creating a special Hr 64.7-billion ($2.4-billion) fund to tackle the COVID-19 pandemic, which has killed 93 Ukrainians as of April 13.

During an emergency parliamentary session that day, 249 lawmakers voted in support of the bill. Most of them were members of the parliament’s ruling Servant of the People party, which gave 226 votes in favor, the exact amount required to pass the law. 

The amended budget will allocate an additional Hr 15.8 billion ($600 million) to the National Health Service, run by the Ministry of Health, to buy medications for those infected with COVID-19. It will also increase the pension fund by Hr 29.7 billion ($1.1 billion), bringing it to over $7 billion in total.

Overall, the budget’s revenue plan has decreased by Hr 119 billion ($4 billion), as gross domestic product (GDP) is estimated to fall by 3.9%. 

However, even these proposals seem unrealistic to some. On April 7, Economy Minister Ihor Petrashko said that Ukraine’s economy would shrink by 4.8% in 2020, 0.9% more than is indicated in the amended budget.

Petrashko also pointed out that the budget is heavily dependent on a potential $8-billion loan from the International Monetary Fund, which hasn’t even been scheduled yet, as the Ukrainian parliament hasn’t adopted the bank law required by the international organization. 

This law – colloquially known as the “anti-Kolomoisky law” after oligarch Ihor Kolomoisky – is set to outlaw the return of nationalized banks to their previous owners. Among these people is Kolomoisky, who used to co-own PrivatBank until the state took over due to insolvency and alleged bank fraud. The law is stalled in parliament by 16,000 amendments. 

Read More: What is happening with PrivatBank court cases and why is this such a big deal

Lawmaker Volodymyr Tsabal, who represents the 20-member Voice party and serves as secretary of the parliament’s budget committee, also claims that the budget is poorly planned.

“The budget is unrealistic, revenues are inflated, the expenses are too expensive, while foreign assistance is blocked without the adoption of the bank law,” Tsabal said during a speech in parliament on April 13. 

Unbalanced budget

According to the government’s new macroeconomic forecast, which forms the basis of the budget, Ukraine’s GDP will shrink from the expected Hr 4.51 trillion ($153 billion) to Hr 4 trillion ($135.5 billion). 

The budget deficit will account for 7.5% of Ukraine’s GDP, or Hr 298 billion ($11 billion). The planned currency rate is Hr 29.5 to $1. 

The initial 2020 budget was passed in November, roughly three months before the start of the COVID-19 pandemic that, as of April 13, has infected over 1.8 million and killed over 115,000 people worldwide.

Then, the budget was planned with a 3.7% increase in GDP and a budget deficit of 2.1%. 

The pandemic, however, has stalled economic output worldwide, with countries closing borders, halting public transportation and forcing many businesses to temporarily shut down.

Correcting the initial forecast, the government has cut subsidies, regional budgets, financial assistance for schools and teachers, expenditure on local elections and the money allocated to the government’s planned census. 

The government has also ruled to decrease expenditures for sporting programs and events by 100%. However, cutting all those programs will only allow Ukraine to save slightly over $700 million. 

As a result, Ukraine’s government debt will hit Hr 2.36 trillion ($88 billion) and will be equal to 65% of Ukraine’s GDP. Currently it stands at 50.9% of the country’s GDP.

Odd expenses

The amended budget has faced criticism from opposition lawmakers, none of whom supported the bill. 

One detail that the opposition has argued against is the increased funding for the interior ministry. A powerful official who has faced accusations of corruption, Interior Minister Arsen Avakov will receive more money, despite broad cuts to other ministries and state agencies.

Read More: Budget bill increases funding for Interior Minister Avakov, harms anti-graft agencies

The amendment in question will increase overall funding for the Interior Ministry by Hr 195 million ($7 million) to a total of Hr 93 billion ($3.4 billion) and cut financing for its staff by only Hr 4 million ($147,300) — a net increase of Hr 191 million for the ministry.

The bill also envisages a Hr 200-million ($7.4-million) increase in funds for the State Border Guard, which is subordinate to Avakov’s ministry.

Meanwhile, budget funding will decrease by Hr 82 million ($3 million) for the High Anti-Corruption Court and its appeals chamber; by Hr 114 million ($4.2 million) for the National Anti-Corruption Bureau of Ukraine (NABU); by Hr 4 million ($147,300) for the National Agency for Preventing Corruption and by Hr 85 million ($3.1 million) for the Asset Recovery and Management Agency.

Budget cuts will also apply to another sensitive area: the judiciary, which has been notoriously corrupt and ineffective in Ukraine. Reductions in spending will include a decrease of Hr 110 million ($4.1 million) for the Supreme Court, Hr 355,000 ($12,340) for measures to ensure the independence of the judiciary, Hr 105 million ($3.9 million) for the prosecutor’s office and Hr 486 million ($17.9 million) for the State Investigation Bureau.

“We’re saying that we cut the budget, but we didn’t cut it for everyone,” said Tsabal. “We give an additional Hr 195 million to the Interior Ministry, yet we cut Hr 1 billion from the financial support for schools.”