Budget Miracle of December. How It Was

Medunytsya Oleg

Expert on budget and decentralization. Member of the Verkhovna Rada Committee on Budget of the 7th-8th convocations. He participated in the development and implementation of budget reform, administrative-territorial reform and…


05 January 2021

Most experts familiar with budget issues were intrigued by the main issue of the year for them. How will Zelensky’s government ride out the 2020 budget? After all, the implementation of the revenue part of which failed as of November.

Since the beginning of November last year, the “treasury” has become firm and allowed only protected articles of the state budget. The Ministry of Finance could not effectively sell its bonds of domestic government loan - securities and replenish the state treasury. A budget catastrophe was imminent, but it did not happen. Why?

Zelensky’s government was pretty lucky. Initially, the European Commission and the World Bank provided a loan of almost UAH 30 billion, and then, against the background of the start of negotiations with the IMF, the Ministry of Finance managed to sell bonds of domestic government loan in December 2020 for almost UAH 100 billion. At the auction on December 29 alone, the Government received UAH 51 billion. Such rates of bonds of domestic government loan sales have never been in the history of our state. Subsequently, in the last days of December 2020, the Government attracted a short-term loan from Deutsche Bank AG London for $ 340.7 million. The State Treasury worked until the night of December 30, carrying out payment documents that have been covered in dust since early November. For a while, the system even hung from the pressure of payment documents and payments were made manually.  

Some experts have already called the December financial miracle to be the “Shmyhal’s pyramid”. In fact, only 2 out of 10 hryvnias received by the budget in December 2020 were earned in Ukraine, and the rest were borrowed. In addition, the so-called short-term funds were borrowed.

Almost 60 billion of this amount must be repaid within the next year. In total, Ukraine will have to repay $ 17 billion in borrowings in 2021 with interest. According to the results of the year of Zelensky’s governance and Big Construction, Ukraine’s public debt increased by a record 116 billion hryvnias.

Incidentally, the inflow of borrowed hryvnias was primarily directed to cover debts for the Big Construction. After all, the budget owed billions of hryvnias to the pool of selected road campaigns entrusted to master budget flows, which they received only at the end of last year. It is safe to say that taxpayers will pay for Zelensky’s Big Construction this year. With interest of course.

Such borrowings are justified when there is hope for rapid economic growth. But how can this growth be expected when corruption schemes, law enforcement and the judiciary, dependent on the whims of the authorities, are rapidly recovering in the country? When even before the pandemic in 2019 due to inept actions of the government, the domestic economy fell. No less problems will be with local budgets next year. About this in the next publication.