What risks does the state budget face?
Vasyl Shkurakov, Deputy Minister of Finance of Ukraine
Every year, the Ministry of Finance faces risks related to the implementation of the state budget. Risk categories are different. These are macroeconomic risks, risks related to public debt and government guarantees, the activities of economic entities in the public sector of the economy, the implementation of the plan of revenues from the privatization of state property, the financial sector, the pension sector. Which of them will have the least impact on the budget, and the implementation of which will seriously affect the state's ability to meet its obligations?
In order to be prepared for possible shocks, in cooperation with the International Monetary Fund in 2016, the Ministry of Finance introduced the obligation to calculate fiscal risks and their impact on the country's budget. The relevant document has been accompanying the draft law on the state budget for the third year in a row and is taken into account by the Ministry of Finance in its implementation.
Fiscal risks have been calculated for decades in most developed countries. It is not just a budget forecasting tool, but a detailed description of the events to be prepared for and a guide to what needs to be done to minimize possible losses. In the post-Soviet space, risk calculation models for the budget have been implemented in the budget process, in particular in Latvia and Georgia.
The Ukrainian economy is constantly undergoing transformation, and accordingly our budget system is subject to greater risks than in developed countries. The Ministry of Finance is interested in minimizing them, because it allows the most effective management of public financial resources, to implement public programs, including social.
At the same time, since the beginning of 2020, the world economy has faced the effects of the spread of COVID-19, which has become a global challenge and blow to most countries, including Ukraine. The introduction of quarantine and unprecedented security measures, in turn, had a negative impact on the economic situation in the country and, accordingly, on the implementation of state budget indicators.
In order to provide financial resources in the state budget for the current year to take effective measures to neutralize the negative effects of the spread of coronavirus infection COVID-19 and support economic activity in the country, the Ministry of Finance has prepared amendments to the law "On State Budget of Ukraine for 2020". it was envisaged to amend both the revenue part of the budget and the expenditure part, which were adopted by the Verkhovna Rada of Ukraine.
In less than two months, the draft law "On the State Budget of Ukraine for 2021" will be submitted to the Verkhovna Rada of Ukraine. In parallel with the calculation of revenues and expenditures, the Ministry of Finance is currently working on the analysis of fiscal risks and the preparation of a relevant analytical document on fiscal risks next year, which would contain recommendations on measures to be taken to minimize such risks.
Information on fiscal risks and their impact on state budget indicators can be found at the link.