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Is there money in Ukraine's budget for higher salaries and pensions?

Author : Oleksandr Okhrimenko

Source : 112 Ukraine

Groysman's government decided to raise the minimum wage to 4,200 UAH and the minimum pension from 1,373 to 1,434 UAH, but not for everyone
22:33, 26 June 2018

Read original article at 112.ua

112 Agency

As it was expected, on the eve of the presidential elections in Ukraine, the distribution of "rewards" began. Groysman's government decided to raise a minimum wage to 4,200 UAH and a minimum pension from 1,373 to 1,434 UAH, but not for everyone. But the question immediately arises: does the government of Groysman have money for these expenses?

It is clear that elections are approaching, and some people really want to stay in the presidential position. And to achieve this goal, raising pensions and minimum wages is the most traditional populist method, although all these increases are ultimately irrelevant and even ridiculous. Judge for yourself, most pensioners will have their pensions increased by 1-2 UAH. Not thousands, but one or two hryvnias. Politicians just scoff. But even this increase in pensions and salaries is not an easy task for the state budget of Ukraine.

Everybody knows that the State Pension Fund is scarce, despite the pension reform, which was held with great PR last year. This year, at the expense of the state budget, the deficit of the State Pension Fund should be covered in the amount of about 150 billion UAH, which is ten billion more than was before the type of the pension reform of 2017. But no one in Groysman's government can recognize that, in fact, the pension reform has failed, they are just promising the next growth of pensions. And I must say that most of the pensioners believed in these stories about the reforms and "pensions, as in Europe" during the Maidan and believe now. It is not difficult to deceive the one who wants to be deceived.

As for the new level of the minimum wage, this is only the beginning. Closer to the presidential elections, the minimum wage will be raised to 5,000 UAH with PR that "reforms are on the march." The authorities simply want to buy a continuation of the banquet at the expense of these handouts. And, most likely, they will buy it. Because, again, people are very naive, and understand that they were deceived when it is too late, and when they themselves admitted to power very greedy corrupt officials who are fighting corruption.

But still. Is there any money in the state budget of Ukraine for a new growth of the minimum wage and pensions? The answer is very simple - "No." According to the State Treasury of Ukraine, for January-May 2018 the plan to collect taxes and fees collapsed. Formally, under fulfillment of the state budget for taxes for January-May 2018 amounted to 0.4% or 2.1 billion UAH. Trifle, at first glance. If you do not pay attention to the thing that in January-May 2018, the National Bank transferred 32 billion UAH to the state budget as part of its income for the current year. Such a trick. The bank pays taxes forward, but not at the end of the year, as required by law and logic. Moreover, all these revenues of the NBU are, as a rule, ordinary hryvnia issue, which is represented in the form of the "NBU income". If you imagine for a moment that the state budget of Ukraine would not have received this hryvnia issue from the NBU, then the deficit of the state budget would be simply enormous. The hryvnia's emission was saved this time by the state budget of Ukraine. And again, the hryvnia issue will be the main source of financing for the growth of the minimum wage and pension. Such a method of raising social standards is constantly criticized by theorists and practitioners because of inflation, and general depreciation of the hryvnia. Partly they are right, indeed the growth of the minimum wage and pensions due to the hryvnia issue is the way to inflation. Empty hryvnia issue is dangerous. The amount of money increases, but the quantity of goods does not grow so fast. Although it will be ridiculous to blame pensioners, who received additional hryvnia to their pension, of the growth of prices. Here the problem is more complicated, and consists in the fact that Groysman's government does not want to engage in real economy and really ensure the growth of the economy so as not to artificially raise minimum wages and pensions, but that wages and pensions grow as a result of real economic growth. According to the results of the first quarter of 2018, Ukraine's GDP grew by a record 3.1%. But, as it turns out, this is not due to the reforms of the Groysman government, and the merit of Ukrainian guest workers who earn money abroad and spend in Ukraine, and therefore trade and production of Ukrainian goods is growing.

Is it possible to have a salary in Ukraine like in Poland, or even more? Yes. Not as fast as we would like, but in ten to fifteen years it is possible. But for this it is necessary to do the right moves in the economy, not to close borders with the CIS countries, but, on the contrary, to open borders and a field for investors from the CIS, including Russia. We should think about how, at the expense of the Association Agreement with the EU, to develop production cooperation with European business, and not only in the production of wires and biscuits. We should really launch the land market and create normal free economic zones like in Turkey. A lot of things should be done so that the minimum wage in Ukraine could be 1,000 euros, and the minimum pension - 500 euros. But you need to do it, and not steal money from the state budget and throw "handouts" to the crowd before the elections.

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