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Salaries and taxes increase: Key figures of Ukraine's state budget 2022

Author : Anna Peshkova

Source : 112 Ukraine

If the state budget of 2021 was called the "budget of opportunities", then the current draft law was called by Minister of Finance Marchenko "the budget for investments in a person, country, future," as if hinting at its social orientation.
11:52, 3 December 2021

state budget
Open source

Judging by the expenditure side of the budget, an ordinary Ukrainian really ended up in the center of attention of officials. The document provides for an increase in average wages in our country to 650 USD. For doctors, payments, in general, should increase to 22 thousand hryvnyas. However, the fact that these payments will be carried out at the expense of increased taxation raises doubts about whether the welfare of the people really cares about the authors of the bill.

And will there be money for higher payments?

Related: Road repairs in Zhytomyr region expose embezzlement of $37,5 million of budget funds

What will the budget money be spent on?

All over the world, top managers forecast revenues before planning expenses. In Ukraine, when planning an estimate for the country's main draft law, officials first remember which promises to the population (albeit completely unrealistic ones) they need to fulfill, and only then they look for income for them. So we'll start with expenses.

They are often formed as easy as shelling pears: they take the budget of the previous year and go through it "with a knife". Somewhere cut, somewhere added. If not enough was added, taking into account the coronavirus factor, it is possible to redistribute funds altogether in "manual mode" through the budget reserve fund.

In 2022, expenses are planned even in greater volume than in 2021 - at the level of 54 billion. This is 5,7 billion USD more than the plan for the current year. Due to this difference, "human-centrism" will be realized.

Minimum wage and pensions

The minimum wage will remain at the current level of 230 USD per month until October 2022. Next fall it will increase to 245 USD.

The living wage from January 1 will be 87 USD, and by December it will grow to UAH 95 USD. That is, it will traditionally be twice as low as the actual one and will not keep pace with inflation.

The financial "supplement" for pensioners concerns mainly point supplements: March indexation, payments to the military, Chornobyl victims. Also, funds are allocated for the additional payment announced by Zelensky for those over 70 years old. In general, the budget of the Pension Fund will grow, which cannot but rejoice: another 1,1 billion USD will be added to last year's 18 billion USD. But this is not enough.

The fund does not have enough funds to pay pensions already now, in 2021. The cash gap is almost 3 billion USD. At the same time, they did not increase the money to cover the deficit of PF funds: they will only increase by a few percent. For pensioners, this is unlikely to threaten anything, because pensions are a protected budget item. However, in general, the fact that such a situation has developed means problems in state policy on this acute social issue.

Related: Prosecutor's office conducts searches at Kyiv municipal corporatization due to budget funds waste during purchase of fuel

However, officials have long understood that Ukraine cannot cope with these payments, therefore, by the second reading of the state budget, they allocated almost 2 billion USD to ensure the preparation of the infrastructure for the implementation of the accumulative system of compulsory state pension insurance. That is, they stake on the fact that the Ukrainians will provide themselves with a decent old age.

Subsidies

Representatives of the Cabinet of Ministers pledged 1,2 billion USD for subsidies. This is slightly more than originally budgeted for 2021. But in general, the increase is also not enough here, because back in October, officials had to urgently review the funding of subsidies even for this year - up to 2 billion USD.

Therefore, the costs of subsidies planned for 2022 are now about 330 million USD less than necessary. But in the spring of next year it is planned to increase utilities, including due to an increase in gas prices. Even according to the memorandum signed with the IMF in the spring, Ukraine should increase spending on subsidies.

It is rather difficult to talk about the validity of the allocated amounts, since the 2022 budget was drawn up based on the population of 35 million, and this year's budget - from 42 million. But in fact, no one knows exactly how many people there are in Ukraine. The census took place exactly 21 years ago.

Although 15 million USD was allocated for the preparation of the All-Ukrainian Population Census for the second reading of the draft budget, so far the validity of the figures that are allocated for social benefits (with the exception of pensions, perhaps), as they say, are "pitchforks on water."

By the way, about water. Next year we will start the "Drinking Water of Ukraine" social program, for which 40 million USD was allocated by the second reading of the budget.

Related: Naftogaz to make deals with all budgetary organizations till November, - CEO

Healthcare

1,35 billion USD was added to healthcare: the government's planned expenditures are almost double the expenditures for 2019. This should make it possible to increase payments to mid-level specialists to 500 USD, to doctors – 800 USD.

By the second reading of the budget, it was decided to allocate an additional 73 million USD for the growth of wages. However, according to Oleg Panasenko, chairman of the Free Trade Union of Medical Workers of Ukraine, funds for such a global increase may not be enough.

It is noteworthy that no additional funds were provided for allowances for doctors working with patients suffering from coronavirus.

The spending on the medical guarantee program still falls short of the statutory minimum 5% of GDP. The same amount is allocated for vaccination in 2022 as in the current year.

Education

Also, in the draft budget, we see plans to significantly improve funding for education (although not as significantly as for medicine) - by 620 million USD. They want to spend the money, in particular, on the construction of the presidential university.

By the second reading, the expenses for the implementation of this project, as well as the expenses for the President's Fund for the Support of Science, Education and Sports, have significantly increased. For these needs will spend 18 million USD. At the same time, only 3,8 million USD is allocated to support scientific research in existing universities. Also, improved funding for universities will be accompanied by the destruction and merger of several dozen universities.

There will be enough funds to raise salaries for teachers, but more modest than for doctors. Thus, there will be no uniform growth in the average salary in the public sector. But the representatives of the sphere are in dire need of financial motivation. The situation with teachers is no easier than with doctors: in the regions, it is not uncommon for cases when, due to a shortage of employees, the same specialist conducts a lesson to students in two classes at once.

They also finally drew attention to scholarships, although the new payments are still very modest (from 700 to 800 USD, depending on academic performance). Students of technical schools after the increase in payments will still receive a miserable amount - up to 400 USD.

It would seem that the very idea of ​​increasing scholarships is very positive. However, firstly, the number of students who receive scholarships is decreasing, which in itself violates the Constitution. And secondly, the minimum pension in Ukraine is 65 USD, so pensioners will receive less than students. Absurd.

Related: Ukrainian Parliament endorsed bill on 2022 state budget in first reading

Army, officials and roads

Expenditures have increased in almost all law enforcement agencies, except for the Ministry of Internal Affairs. 6% of GDP is allocated for the army and defense, even more than the law requires. Although the other day Zelensky in the Verkhovna Rada boasted of an unprecedented increase in defense spending, de facto slightly less than half of the 12 billion USD will go directly to protect the state.

Almost all of the increased defense spending (135 million USD) by the second reading will go to salaries. The law enforcement agencies will spend 175 million USD more.

As for spending on officials, no one talks about optimizing the management system, except for the liquidation of the so-called deputy fund. In the second reading, the expenses for the maintenance of the President, the Verkhovna Rada and the Cabinet of Ministers, on the contrary, increased by UAH 206.4 million.

The president is allotted 4,5 billion USD for "Big Construction". The government even emphasized that the pace of road construction would not slow down. They will also be engaged in the repair of individual districts and airports.

Will the country be in red?

Officials are afraid of the deficit like fire, so the draft budget proposed to reduce it from 5.5 to 3.5% of GDP (6,9 billion USD).

Do you believe that the dollar will rise to UAH 28.6-28.7 by the end of the year? It is this figure that is spelled out in the document for 2022. And this is not a peak, but an average value. In fact, officials assume that in some months of next year the dollar will reach UAH 30. Let's remind: in the current budget the rate is set at UAH 29.1. Now the dollar is hovering around the UAH 27 mark.

Inflation of 6.2% is also included in the budget. This year it was set at 8.2%. Now we have more than 10%, and after the increase in wages, inflation will only grow.

Understated inflation and an overvalued dollar rate artificially inflate our budget, which in reality will make the deficit worse. However, as we remember, many tax revenues are not taken into account, so we can avoid the problem.

Growing deficits in and of themselves are not terrible. The only question is where the funds go.

Related: One Zelensky's National Legend of Ukraine badge costs $4,300 of budget funds

"The growth of government purchases and social payments, with a balanced approach, the economy is able to calmly absorb without serious negative consequences for inflation and the exchange rate. The direction of such a volume of funds in the real sector leads to sustainable economic growth. And most importantly, without any obligations to external players," says financial analyst Oleksiy Kushch.

In this case, everything is planned the other way around: if the deficit will be formed, it will be due to debt payments, and not due to the growth of social benefits. It is also bad how officials want to extinguish this "minus". Everything continues to hold on to a spring, which will burst sooner or later (the sooner, the more painless). According to the prime minister, about 70% of the deficit will be repaid by issuing domestic government bonds.

The draft state budget for 2022 provides for a GDP growth of 3.8%. This is expected: back in June, experts suggested that the estimate would include rapid economic growth in order to fulfill the president's promises to increase payments to doctors. However, each additional percentage of GDP growth will be much more difficult to come up with. Moreover, Ukraine may again find itself in the "red" quarantine zone.

Is this growth forecast justified? Considering that we are again dealing ideologically with the budget for roads, officials, and security officials, it is unlikely. The government did not want to send money to the development of the economy, which could qualitatively improve the living standards of Ukrainians.

Related: Draft state budget-2022 submitted to Ukrainian Parliament for second reading

The draft law is undeservedly called social because the costs under this item are still very modest and amount to only about 35% of GDP. Unfortunately, apart from the personal "wishes" of officials and inflated figures, the document cannot boast of anything. No "opportunities" for you, no "investment in a person."

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