News (#10 October 2017)


Draft State Budget for 2018

The Draft Law On the State Budget of Ukraine was submitted by the Government to Parliament and registered under No.7000.

The Ministry of Finance of Ukraine developed the State Budget-2018 on the basis of a medium-term budget resolution based on a new model of fiscal policy (medium-term budget planning).

The Ministry of Finance has reported the main key indicators of the text:
i) GDP +3%; ii) inflation +7%; iii) budget deficit 2.4% of GDP (UAH 77.9 billion); iv) revenues of the consolidated budget will grow by 15% and will exceed UAH 1 trillion for the first time; v) The Government will not raise taxes, revenues will increase thanks to economic growth.

It is also reported that the State Bud-
get-2018 includes a budget for funding all major reforms. So, within the framework of healthcare reform, the Ministry of Finance has increased expenditure for the healthcare sector by 11% for 2018. Also, implementation of a pilot project on change of funding for leading clinics of the National Academy of Medical Sciences will be proposed, which provides for a transition from maintenance on the basis of estimated cost to maintenance on the basis of payment for medical care services provided. In particular, it is proposed to expand the list of services that will be paid for from the state budget (around 9,000 services). Moreover, from 2018, the Ministry of Finance proposes to move from maintenance of scientific institutions to the state order for scientific research with high priority for society. About UAH 500 million will be allocated for the specified purposes.

As part of reform of education, consolidated budget spending on this sphere will be increased by 18% in 2018, which is about UAH 34 billion more than in 2017.
In particular, in support of the New Ukrainian School project, spending to the tune of UAH 1.8 billion was taken into account, which will be aimed at improving the quality of secondary education. It is also planned to increase teachers salaries by 25% in 2018, for which an additional UAH 6.7 billion were allocated.

The State Budget-2018 also provides for the funds to carry out pension reform. The amount allocated to the Pension Fund is maintained at the 2017 level, in the amount of UAH 141.3 billion.

Moreover, the Ministry of Finance also included in the budget funding for large-scale reform of SFS next year. In particular, these funds will be spent on updating the material and technical base, increasing the salaries of employees, etc.


European Parliament approved “solidarity” law on gas sharing

In accordance with the Solidarity Law, approved by the European Parliament, the countries of the European Union will be obliged to share gas with neighbors in crisis situations, beginning with the coming winter.

The “solidarity principle”, which is in line with the revised document, means that in the event of a gas supply crisis in one of the EU countries, the priority for its neighbors should be to provide gas to households and hospitals in the country facing the problem, rather than supplying its own industrial users.

The principle can also be extended to gas supplies to power plants if it turns out that the functioning of the power supply system of a state facing gas shortage is threatened.

The new legislation initially faced tough opposition from a number of the EU countries. So, in Great Britain it was used as an argument in favor of the country’s exit from the European Union by Brexit supporters.

The European Council, European Parliament and the European Commission had to hold several rounds of trilateral talks in order to reach a compromise and to create a final version of the Solidarity Law.

Nevertheless, there are still questions about how the EU countries will compensate each other for the cost of emergency gas supplies as well as for lost revenue.

The text of the Law declares that the state requesting gas in accordance with the “solidarity principle” should quickly pay or guarantee timely payment of fair compensation to the country providing aid.

The compensation should, at the minimum, cover the cost of the supplied gas and related costs, as well as costs related to possible legal and arbitration proceedings, as set out in legislation.

The new Law also includes a “transparency clause” obliging gas companies to provide regulators with data on long-term commercial gas contracts. This requirement concerns contracts that provide 28% of the annual gas consumption of a particular EU country. In the preliminary version of the Law this figure was 40%.


Changes to Law On Advertising

The Verkhovna Rada’s Committee on Freedom of Speech and Information Po
has recommended adopting its version of Draft Law No. 3454 in the second reading.

In particular, it is proposed to prohibit placement of advertisements or advertising means on holding, supporting and other elements of overhead networks, as well as on the means and equipment of outdoor lighting, including supporting units.

These changes should contribute to maintaining authenticity and spatial composition of objects of cultural heritage and of architectural complexes. Moreover, the absence of advertising on posts should improve the road safety situation.


Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin

On 20 September 2017, the Cabinet of Ministers held a meeting at which it approved the Draft Law on Ukraine’s accession to the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin.

After accession to the Convention, domestic manufacturers will be able to purchase raw materials and constituent parts in countries of the European Free Trade Association, and to sell finished products in the EU, maintaining the status of preferential origin. Accordingly, such manufacturers will pay reduced customs rates when importing goods or will be able to export goods without paying any duty.

It is also planned to increase the footprint of domestic manufacturers of goods in the markets of countries, with which agreements on free trade areas have been concluded. These include EU countries, the European Free Trade Association countries, as well as Moldova, Montenegro and Macedonia.


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