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BUDGET MONITORING: Analysis of Budget Execution in January-June 2011 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 related to 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 January-June 2011 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 January-June 2011 / [I.F.Shcherbyna, A.Yu.Rudyk, V.V.Zubenko et al]; IBSER, Municipal Finance Strengthening Initiative Project, USAID. – К. : 2011. – 116 p. Publisher’s Note: The content of this product is the responsibility of the Institute for Budgetary and Socio- Economic Research (IBSER) and does not necessarily coincide with the views of USAID or the United States Government. All rights in this publication are reserved. Use of the monitoring materials must be coordi- nated with IBSER experts. © USAID, 2011 © IBSER, 2011 CONTENTS 3 CONTENTS Executive Summary .................................................................................... 9 SECTION 1. REVIEW OF NORMATIVE-LEGAL FRAMEWORK ON BUDGET FOR MAY-SEPTEMBER 2011 ...................... 12 1.1. Revenues of State Budget of Ukraine ................................ 12 1.2. Expenditures of State Budget of Ukraine and Budget Process ........................................................ 14 1.3. Local Budgets and Interbudgetary Relations ...................... 16 SECTION 2. ANALYSIS OF MACROECONOMIC INDICATORS IN JANUARY-JUNE 2011 ............................................ 20 SECTION 3. ANALYSIS OF UKRAINIAN BANKING SYSTEM INDICATORS IN JANUARY-JUNE 2011 ........................... 27 SECTION 4. ANALYSIS OF BUDGET INDICATORS IN JANUARY-JUNE 2011 ............................................ 39 4.1. Intake of Revenues of the Consolidated Budget and State Budget of Ukraine in January-June 2011 ....................................................... 39 4.2. Financing of the State Budget of Ukraine and State Debt in January-June 2011 ................................. 49 4.3. Analysis of Expenditures and Crediting of the Consolidated and State Budgets of Ukraine in January-June 2011 ........................................ 55 4.4. Execution of Local Budgets in January-June 2011 ....................................................... 66 Appendix А. Expenditures of the State Budget of Ukraine by Program Classification in January-June 2009-2011 .............. 93 Appendix B. Execution of General Fund Revenues of Local Budgets in January-June 2011 ............................................................. 97 Appendix C. Data on the Status of Intergovernmental Settlements between the State Budget and Local Budgets in January-June 2011 ............................................................. 110 Appendix D. The Status of Remittance of State Budget Subventions to Local Budgets in January-June 2011 .................................... 112 4 ANALYSIS OF BUDGET EXECUTION IN JANUARY-JUNE 2011 LIST OF TABLES Table 2.1: Nominal and Real Salaries and Wages by Region of Ukraine in January-June 2009-2011 ................................................................23 Table 3.1: Change in the Amount of Assets of the Largest Banks and Their Shares in the Total in the First Half of 2011 ..........................36 Table 4.1.1: Revenues of the Consolidated, State, and Local Budgets of Ukraine in January-June 2008-2011 ................................................39 Table 4.1.2: Structure of Consolidated and State Budget Revenues in January-June 2009-2011 ................................................................41 Table 4.2.1: Financing of the State Budget of Ukraine in January-June 2007-2011 ................................................................50 Table 4.2.2: Budget Expenditures for Repaying and Servicing the State Debt in January-June 2009-2011 ....................52 Table 4.3.1: Expenditures of the Consolidated, State, and Local Budgets of Ukraine in January-June 2009-2011 ...................55 Table 4.3.2: Growth Rates of Certain Expenditures of the Consolidated, State, and Local Budgets of Ukraine in the First Half of 2009-2011 Compared to Previous Periods ............................................................................58 Table 4.3.3: Expenditures of the State Budget of Ukraine by Functional Classification in January-June 2009-2011 ................................................................61 Table 4.3.4: Expenditures of the State Budget of Ukraine (with Intergovernmental Transfers) by Economic Classification in January-June 2009-2011 .......................62 Table 4.3.5: Indicators of Budget Credit Provision and Repayment in January-June 2009-2011 ................................................................65 Table 4.4.1: Dynamics of Local Budget Revenues (without Intergovernmental Transfers) in January-June 2009-2011 ................................................................66 Table 4.4.2: Dynamics of Local Budget Expenditures (without the Funds Transferred from Local Budget to the State Budget) in January-June 2009-2011 .................................79 Table 4.4.3: Dynamics of Intergovernmental Transfers from the State Budget to Local Budgets in January-June 2009-2011 ............87 LIST OF GRAPHS 5 LIST OF GRAPHS Graph 2.1: Dynamics of Price Indices in 2008–2011 ...........................................22 Graph 4.1.1: Dynamics of Monthly State Budget Revenues in 2006-2011 ...............40 Graph 4.1.2: Dynamics of Monthly State Budget Revenues from Enterprise Profit Tax in 2006-2011 ............................................42 Graph 4.1.3: Dynamics of Monthly State Budget Revenues from Value Added Tax in 2006-2011 ..................................................43 Graph 4.2.1: Comparison of the Amounts of State Budget Borrowing and State Debt Repayment in January-June 2006-2011 .....................51 Graph 4.3.1: Dynamics of Monthly Expenditures of Consolidated Budget in 2006-2011 ...............................................57 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 January-June 2007-2011 ..............................................................57 Graph 4.3.3: Dynamics of the Share of Special Fund Expenditures of the State Budget of Ukraine without Intergovernmental Transfers in January-June 2006-2011 ...............................................59 Graph 4.4.1: Dynamics of Monthly Local Budget Revenues (without Intergovernmental Transfers) in 2006-2011 ..........................67 Graph 4.4.2: Dynamics of Monthly Actual Expenditures of Local Budgets in 2006-2011 ........................................................81 Graph 4.4.3: Share of Expenditures for Payroll with Taxes in the General Fund Structure of Local Budgets by Region in January-June 2010-2011 ..............................................85 Graph 4.4.4: Rate of Growth of Transfers and Local Budget Revenues in January-June 2006-2011 ..............................................................88 Graph 4.4.5: Dynamics of Remittances of the Equalization Grant and Funds Transferred to the State Budget from Local Budgets in January-June 2006-2011 ..............................................................90 Graph 4.4.6: Dynamics of the Share of Transfers to the State Budget in Local Budget Expenditures in January-June 2006-2011 ..................92 6 ANALYSIS OF BUDGET EXECUTION IN JANUARY-JUNE 2011 LIST OF CHARTS Chart 2.1: Dynamics of Industrial and Agricultural Production Indices in January-June 2009-2011 ...............................................................21 Chart 2.2: Export and Import of Goods and Services in January-June 2010-2011 ...............................................................24 Chart 2.3: Structure of Foreign Trade in Goods by Key Partner Country in January-June 2010-2011 ...............................................................25 Chart 3.1: Dynamics