BUDGET MONITORING: Analysis of Budget Execution in 2010 Budget Monitoring Contract # 121-А-00-08-00708-00 October 2008 Prepared for: Office of Economic Growth Regional USAID Mission for Ukraine, Belarus, and Moldova This publication is prepared by the Institute for Budgetary and Socio-Economic Research (IBSER) as part of the Municipal Finance Strengthening Initiative (MFSI) project implemented with support of the American people provided through the United States Agency for International Development (USAID). BUDGET MONITORING: ANALYSIS OF BUDGET EXECUTION BOOK SERIES The series is published by the Institute for Budgetary and Socio-Economic Research (IBSER) as part of the Municipal Finance Strengthening Initiative (MFSI) project implemented with support of the American people provided through the United States Agency for International Development (USAID). The main goal of the project is strengthening the capacity of cities to plan and finance local development projects, in particular, those intended for improving the municipal infrastructure by strengthening their own financial resources and attracting alternative sources for financing of local development. www.ibser.org.ua ____________________________________________________________________________________ Budget Monitoring: Analysis of Budget Execution in 2010 This publication has been prepared and arranged by the following IBSER experts: I.F.Shcherbyna, Director General V.V.Zubenko, Deputy Director General, Director of PPB and Training Programs A.Yu.Rudyk, Director, Department of Tax Policy and Monitoring I.V.Samchynska, Director, Department of Financial Policy A.I.Korniyenko, Deputy Director, Department of PPB and Trainings Programs I.M.Pereli, Chief Economist, Department of Financial Policy M.S.Svyeshnikova, Banking Consultant ____________________________________________________________________________________ Budget Monitoring: Analysis of Budget Execution in 2010 / [I.F.Shcherbyna, A.Yu.Rudyk, V.V.Zubenko, I.V.Samchynska]; IBSER, Municipal Finance Strengthening Initiative Project, USAID. – К. : 2011. – 132 p. Publisher’s Note: The contents of this product are the responsibility of the Institute for Budgetary and Socio- Economic Research (IBSER) and do not necessarily reflect the views of USAID or the United States Government. All rights in this publication are reserved. Use of the monitoring materials must be coordinated with IBSER experts. © USAID, 2010 © IBSER, 2010 CONTENTS 3 CONTENTS Executive summary .................................................................................... 9 SECTION 1. REVIEW OF THE NORMATIVE–LEGAL BUDGET FRAMEWORK FOR DECEMBER 2010 – MARCH 2011 ....... 14 1.1. Revenues of the state budget of Ukraine ........................... 14 1.2. Expenditures of the state budget of Ukraine and the budget process ................................................... 15 1.3. Financing and state debt .................................................. 20 1.4. Public –private partnership ...............................................21 1.5. Local budgets and interbudgetary relations ....................... 22 SECTION 2. ANALYSIS OF MACROECONOMIC INDICATORS IN 2010 ................................................30 SECTION 3. ANALYSIS OF UKRAINIAN BANKING SYSTEM INDICATORS IN 2010 .................................... 37 SECTION 4. ANALYSIS OF BUDGET INDICATORS IN 2010 .................. 51 4.1. Intake of revenues of consolidated budget and state budget of Ukraine in 2010 .................................. 51 4.2. Financing of the state budget of Ukraine and state debt in 2010 ..................................................... 61 4.3. Analysis of expenditures and crediting of the consolidated and state budgets of Ukraine in 2010 ................................ 70 4.4. Execution of local budgets in 2010 .................................... 84 APPENDIX ...........................................................................114 Appendix А. Expenditures of the State Budget of Ukraine by Program Classification in 2008-2010 ...................................114 Appendix B. Execution of General Fund Revenues of Local Budgets in 2010 ........................................................ 116 Appendix C. Data on the Status of Intergovernmental Settlements between the State Budget and Local Budgets in 2010 ......................................................126 Appendix D. The Status of Remittance of State Budget Subventions to Local Budgets in 2010.............. 129 4 ANALYSIS OF BUDGET EXECUTION IN 2010 LIST OF TABLES Table 2.1 Nominal and Real Salaries and Wages by Region of Ukraine in 2008-2010 ...................................................................33 Table 3.1 Change in Assets of Largest Banks and Their Share in the Total Amount in 2010 ......................................47 Table 4.1.1 Revenues of the Consolidated, State, and Local Budget of Ukraine in 2007-2010 ...................................................................51 Table 4.1.2 Structure of Consolidated and State Budget Revenues in 2008-2010 .........................................53 Table 4.2.1 Financing of the State Budget of Ukraine in 2006-2010 ......................64 Table 4.2.2 Budget Expenditures for Repayment and Servicing of State Debt in 2008-2010 ..............................................................65 Table 4.3.1 Expenditures of the Consolidated, State, and Local Budgets of Ukraine in 2008-2010 ......................................70 Table 4.3.2 Growth Rates of Certain Expenditures of the Consolidated, State, and Local Budgets of Ukraine in 2008-2010 Compared to Previous Periods ..........................................................................74 Table 4.3.3 Expenditures of the State Budget of Ukraine by Functional Classification in 2008-2010 ..........................................78 Table 4.3.4 Expenditures of the State Budget of Ukraine (with Intergovernmental Transfers) by Economic Classification in 2008-2010 ..........................................79 Table 4.3.5 Indicators of Budget Credit Provision and Repayment in 2008-2010 ...................................................................................82 Table 4.4.1 Dynamics of Local Budget Revenues (without Intergovernmental Transfers) in 2008-2010 ..........................85 Table 4.4.2 Per Capita Local Budget Revenues Disregarded when Determining Intergovernmental Transfers and Capital Subventions by Region in 2009-2010 ..............................96 Table 4.4.3 Dynamics of Local Budget Expenditures (without the Funds Transferred from Local Budget to the State Budget) in 2008-2010 ....................................................98 Table 4.4.3 Dynamics of Intergovernmental Transfers from the State Budget to Local Budgets in 2008-2010 .........................................................109 LIST OF GRAPHS 5 LIST OF GRAPHS Graph 2.1 Dynamics of Price Indices in 2007-2010 ............................................32 Graph 4.1.1 Dynamics of Monthly State Budget Revenues in 2005-2010 ...................................................................................52 Graph 4.1.2 Dynamics of Monthly State Budget Revenues from Enterprise Profit Tax in 2005-2010 ............................................54 Graph 4.1.3 Dynamics of Monthly State Budget Revenues from Value-Added Tax in 2005-2010 ...............................................56 Graph 4.2.1 Dynamics of the Ratio of State Budget Deficit and the State and State Guaranteed Debt to GDP in 2004-2010 ...................................................................................62 Graph 4.2.2 Comparison Between State Budget Borrowing and State Debt Repayment in 2005-2010 ..........................................64 Graph 4.3.1 Dynamics of Monthly Consolidated Budget Revenues in 2005-2010 ...................................................................................72 Graph 4.3.2 Dynamics of the Share of Social Expenditures in the Structure of Expenditures of the Consolidated, State, and Local Budgets of Ukraine in 2006-2010 ...................................................................73 Graph 4.3.3 Dynamics of the Share of Special Fund Expenditures of the State Budget of Ukraine without Intergovernmental Transfers in 2005-2010 ....................................................................75 Graph 4.4.1 Dynamics of Monthly Local Budget Revenues (without Intergovernmental Transfers) in 2005-2010 ..........................86 Graph 4.4.2 Dynamics of Actual Monthly Expenditures of Local Budget in 2005-2010 ...........................................................99 Graph 4.4.3 Share of Expenditures for Payroll with Taxes in the General Fund Structure of Local Budgets by Region in 2009-2010 ...................................................................104 Graph 4.4.4 Rate of Growth of Transfers and Revenues of Local Budgets in 2005-2010 .........................................................110 Graph 4.4.5 Dynamics of Remittances of the Equalization Grant and Funds Transferred to the State Budget from Local Budgets in 2006-2010 .....................................................111 Graph 4.4.6 Dynamics of the Share of Transfers to the State Budget in Local Budget Expenditures in 2005-2010 .........113 6 ANALYSIS OF BUDGET EXECUTION IN 2010 LIST OF CHARTS Chart 2.1 Dynamics of Industrial and Agricultural Production Indices in 2008-2010............................31 Chart 2.2 Export and Import of Goods and Services in 2009-2010 ..................34 Chart 2.3 Structure of Foreign