Fiscal Sector Reform In Ukraine

Ukraine encountered the following problems during 2004-2005. The process of recovery, which the country was going through during 2000 to 2004 halted in 2005. The halt was evident from the fact because the gross domestic product in 2004 was 12% . In contrast, the gross domestic product or GDP was 2.4% in 2005.
There were other backslides as well. Rate of inflation in Ukraine was in double digits in the year 2004. Trade balance as well as current account balances dropped sharply. To add to this, the wages in the public sector increased. Investment also declined drastically. Investment declined because the government was planning to re privatize companies in Ukraine.

The other sectors of the economy were also disrupted. All of the above situations necessitated the implementation of fiscal sector reform in Ukraine.

Primary budget:
Some economists held the opinion that primary budget surplus ought to be restored. This is because greater is the primary deficit of the government in Ukraine, greater are the chances of printing extra banknotes. In addition to the primary deficit, the Debt-GDP ratio is also required to be high. It has also been ascertained that even though the process of privatization does not impact primary budget, it considerably slows down the process of increase in public debt.

Public debt:
To avoid a situation, which would result in unmanageable growth pertaining to public debt, a stronger fiscal sector reform in Ukraine is required. Studies reveal that in case there is an increase in employment as well as real gross domestic product or GDP after a fiscal sector reform in Ukraine and if a fiscal sector reform in Ukraine results in reduction in public consumption, which include social benefits as well as wages in the public sector, the public investment does not change. However, economists say that wage cuts should not be indiscriminate.
Fiscal sector reform in Ukraine also states that if employment is reduced then the working professionals could be paid optimally and would in turn reduce incidence of corrupt practices.
Investment climate:
Another fiscal sector reform in Ukraine comprised the improvement of investment climate by the government headed by Yekhanurov. This was attained by easing the regulatory pressures and by enhancing property rights security.
Owing to deregulation, approximately 4000 acts were abolished. Earlier there were as many as 9000 Acts, all of which were regulatory in nature. Deregulation has also assisted in bettering the business prospects in the country.
Transparent budget system:
The prevailing budget system in the country ought to be transparent. Forecasts state that there are chances for further improvement in fiscal sector reform in Ukraine. The structural reforms are already implemented in 2007.

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Last Updated on : 26th June 2013

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