OREANDA-NEWS. December 09, 2010. Dear members of the Government!

Dear invited!

The first item on the agenda of meeting of the Cabinet of Ministers of Ukraine is the draft state budget for next year.

This is a key issue for the state.

I want to emphasize that the Finance Ministry and the Government in general were working continuously on the budget project since almost the moment when we came to power. However, without a new tax legislation the Government could not complete work on this for our state crucial document.

Therefore, the delay in its adoption and implications for the state and citizens, it is on the conscience of those who interfered in time to take vital decisions for the state.

Government and Parliament should pass the budget process in a very short time, so that the country enters the New Year with a precisely defined plan of action. And so that from the first day of 2011 we laid the foundations for sustained economic and social sphere development.

The budget for 2011 is the continuation of the new economic policy, which the Government carried out this year.

What is the main goal of this policy? To take the country out of crisis, to stop the slide into the abyss of debt, to create conditions for economic reconstruction, to concentrate all the possible costs of development of the country, and eventually to push the accelerated economic growth. And, already on the basis of growth to raise consistently the level of social protection of our people.

Budget 2011 has become the springboard for innovation development of Ukraine and a new quality of life.

Does the budget have any alternative? We saw it in the budgets of 2008 and 2009, which ran the economy in collapse and the state in the debt hole. I recall that only in 2009 the previous government, plugging the budget hole, borrowing 160 billion USD, dissolved aimlessly.

The example of such countries as Greece, Portugal, Ireland, where the government were involved into the debt spiral and now actually have to cut salaries, pensions, social assistance, indicate that this is the path to nowhere. This is despite the fact that these countries are the members of the European Union and receive from the EU an unprecedented financial assistance.
Suffice it to say, that Ireland has received little assistance equivalent to three annual budget of Ukraine!

We have no such opportunities. Our government should rely primarily on its own strength.

Budget 2011 is the reform budget. It was formed on the basis of the new Budget Code, which strengthens the financial viability of local budgets. The budget revenue is calculated based on the provisions of the Tax Code, and is subject to reduction of administrative barriers of doing business.

The draft budget for next year is charged not only with the measures to restore the national economy and to ensure adequate social protection, but also to ensure the economic reform program of the President of Ukraine.

The draft budget for 2011 takes into account the positive economic trends of this year. First of all, this is inflation. In particular, the consumer price index for December 1, was 8.2 percent.

Please note that the lion's share of growth was formed in January-March (when inflation reached almost 5%), and in September, when an abnormal rise in prices for grains and some speculators attempts to provoke rush demand - led to the food prices increase.

Now we have all the possibilities, the first time in 7 years, to finish the 2010 with inflation below 10%.

In 2011, these dynamics will be fixed: target benchmark for consumer price index is 8.9%.

I will not deprive the Finance Minister, who will give us detailed provisions of the Law of Ukraine "On State Budget for 2011".

I will cite only a few facts.

In the year 2011 we will decrease the tax burden on the economy. If previous years, almost 30% of GDP were redirected through the budget, in 2011 this figure would be decreased to 28.7%. That is the answer to lies that the Tax Code increases the tax burden on the economy. It reduces the tax burden on the economy! I emphasize that again - reduces!

In such circumstances, we have very carefully approached the use of limited budgetary resources.

First, talking about measures to balance the budget and to reduce its deficit (3%) are based on: the rational use of budget funds, on improving the efficiency of public expenditures and their concentration on priority areas.

We reduce state expenses by 23%. This will become possible, including through administrative reform. Maintenance costs for government bodies in comparison with the year 2010 are reduced by more than 1 billion UAH.

First, we are reducing the administrative costs, we will continue to optimize the number of employees of state and local authorities, we will liquidate inefficient spending.

By 30% we reduce the volume of public borrowing. The volume of state guarantees is decreasing.

Due to making order in the pension fund, the following year its need for support from the state budget is reduced. A pension reform will reduce the pension fund deficit by one third.

Funds released are aimed at ensuring social security and bringing the economy to sustainable growth trajectory.

Nearly by 1 billion UAH health expenditures are increased. 600 mln.UAH are additionally focused on environmental protection. 500 million UAH are for the spiritual and physical development.

We continue to plan to increase the size of a living wage and minimum wage.

We will increase the size of grants, payments to families with children, disabled children, large families, etc. In addition, the size of maternity payment is increased 1.6 times.

Taking into account the necessity to support the most vulnerable people, we increase almost by 20% the resources for benefits and housing subsidies to population.

In addition, we plan to increase 2.3 times the state budget capital spending.

Development budget funds are focused on key areas to stimulate investment and innovation growth of the economy. Among them: Programme of preparation for the finals of European Football Championship EURO - 2012 in Ukraine; implementation of national projects; development and introduction of promising new technologies; support for energy efficiency projects and energy saving etc.

Government guarantees will be provided exclusively for investment and innovation projects of national significance.

These budget programs and projects to be financed from the state budget, are planned in view of their continuation in the medium and long term.

The main priority of the regional aspect of fiscal policy in 2011 is to create conditions for sustainable development of areas, to increase their competitiveness.

I will not dwell on all the innovations. I will just note that due to budget reform implementation the resource base of local budgets was increased by 15.5 billion.

Local development budget in 2011 would increase in 3.6 times compared with the current year. Furthermore, expenditures of local budgets for social and economic development would increase in 1.4 times.

Thus, the dependence of local budgets on transfers from central government is reduced and investment capability of the areas is increased. In general, I emphasize this is the tough budget of the country that from the deep abyss of crisis, without stopping, steps on the track of accelerated growth.

I have signed the resolution on the immediate development of regulations that will ensure the implementation of the Tax Code by all the ministries and departments concerned. They should effectively manage the risks posed by the reform.

Tax reform has become a legal reality. In fact, that is the lifebuoy for our economy, the only way to create new jobs and increase wages and pensions.

I draw attention of the Members of the Government to the critical importance and thoroughness of work to explain the new tax legislation and its implementation. As soon as possible we need to print the required number of copies of the Tax Code, related regulations, to lay them on the Internet and to organize interactive learning of new tax legislation.

Everybody understands that time is extremely little. However, this should not affect the quality and timeliness of the documents prepared and their submission to Cabinet of Ministers.

I especially emphasize, that the Ministry of Finance, the State Tax Service of Ukraine must immediately organize training of tax service employees and conduct extensive outreach training among the taxpayers.

The coming months the main content of these services should be the advisory rather than fiscal requirements.

Dear Colleagues!

Concerning other agenda items.

We will review several drafts of strategic documents. In particular, we will discuss the draft state migration policy concept.

We will also discuss the draft Nuclear Code Concept, which envisages the improvement of national legislation in this area and its adaptation to EU legislation.

In order to implement projects on socio-economic and cultural development priorities under the President of Ukraine Decree № 895 the Government will consider during this session draft resolutions: "On approval of the national projects provisions" and "On approving the list of such projects".

We also will consider a number of documents aimed at improving the state registration of real estate and their identification. It is about orders on: making and setting requirements for registration of cadastral maps and cadastral plans of lands and so on.

Among the documents aimed at reducing the regulatory burden we would consider a bill to abolish the state regulation of wage fund of enterprises-monopolists. This provision, first, does not correspond to the principles of market economy, secondly, impedes the development of such businesses and, is the factor for the income shadowing.

It is also proposed to simplify the accounting on the docks and movement in the territorial waters of Ukraine of small craft vessels and other vessels. Such changes are essential for creating an enabling environment for tourism business.

Concerning the regional context. To finish the emergency and recovery operations in areas of main conduit in the city of Kerch it is proposed to allocate additional 10.8 million UAH from the state budget reserve fund to the Council of Ministers of Crimea. In addition, the ARC will be under the experiment on the creation of information-analytical system of regional management and implementation of social e-cards.

Thus, the experiment will be conducted in five administrative units (Kyiv, regions of Kyiv, Kharkiv and Chernivtsi, and AR Crimea).

Today we will consider the reorganization of the National Law Academy of Ukraine named after Yaroslav the Wise. This educational institution prepares multidisciplinary professionals in the legal field, conducts research and development, has the status of self-governing (autonomous) national research university.

Ukraine continues its close cooperation with international financial institutions and the European Union. Today, we will regulate the procedure of preparation and implementation of projects implemented in the framework of the European Neighborhood and Partnership Instrument. For those applications in border regions the EU funds will be channeled on free and irrevocable basis.

In the sphere of international activities, we are planning to approve the Agreement between the Governments of the CIS members on cooperation in combating trafficking in counterfeit drugs.

In addition, we will send for ratification by the Verkhovna Rada of Ukraine the Agreement between Ukraine and Croatia on maritime merchant shipping.

Thank you for your attention.

Let us work on the agenda issues.