Ukraine: Technical Assistance Report-Strengthening Budget Formulation and Fiscal Risk Management

IMF Staff Country Reports, December 6, 2019

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Implementing strategic planning and a medium-term budget framework (MTBF) is a core component of Ukraine’s Public Financial Management (PFM) reform strategy.
A pilot MTBF conducted in 2017 formed the basis for amendments to the Budget Code in December 2018, which firmly establish a MTBF as the basis for budget preparation.
The December 2018 amendments establish a legal basis for related reforms, including regular spending reviews and monitoring and managing risks to public finances.

The report highlights that a central margin should be established to:
- accommodate budget volatility, and
- meet the costs of genuinely urgent, unavoidable and unforeseeable expenditure pressures that may arise.
To reinforce spending discipline, the margin should be:
- tightly controlled,
- centrally managed, and
- transparently reported.

Strategic planning should be improved to provide a stronger basis for integrated policymaking, strategizing, planning and budgeting.
Creating a robust strategic planning system would assist in aligning strategy, planning and the MTBF for better budget formulation.

Institutionalize the MTBF as the basis for budget preparation in line with the December 2018 Budget Code amendments.
Conduct regular spending reviews supported by the legal framework established in the amendments.
Establish and centrally manage a tightly controlled and transparently reported central margin to handle budget volatility and urgent/unforeseeable expenditures.
Strengthen strategic planning systems to support integrated policymaking and to underpin medium-term budgeting.