First meeting of working group on fiscal risks management took place at Ministry of Finance in Ukraine
OREANDA-NEWS. February 11, 2016. Today, took place the first meeting of the interagency working group on fiscal risks management, initiated by the Ministry of Finance of Ukraine and with the participation of the German delegation. This group aims to introduce a new European approach to the assessment of the State-Owned Enterprise (SOEs) and the impact of their activities on the state budget.
There are over 3 340 SOEs in Ukraine today out which 45% non-operating. Those 55% operating SOEs generated 115bn UAH (7.2% GDP) net loss in 2014 while their total turnover was at high 22% GDP. In same time all SOEs are possessing 870bn UAH of gross assets and paid in dividends 0.7% of total budget revenues in 2014.
Low efficiency of state enterprises creates significant fiscal risks for the state budget, particularly due to:
- decrease in budget revenue due to lower tax and dividends transfer from SOEs
- Contingent risks emanating from the outstanding stock of state guarantees on SOE debt
- Serial underinvestment, which could require future capital injections and other obligations by SOEs which could eventually fall on the budget.
Apart from the question of effectiveness and impact on the budget, the SOEs management is most of the time connected with accusations of corruption and political pressure.
To minimize these risks, increase transparency and prevent corruption, Ukraine’s Government insists on soonest privatization of most SOEs and reduction of the number of the SOEs left. Furthermore the Ministry of Finance of Ukraine aims to begin systematic work on the assessment of the fiscal risks of state-owned enterprises, and minimize the negative impact of state-owned enterprises activities on the budget and fiscal policy as a whole.
The most important step is the creation of the interdepartmental working group initiated by the Ministry of Finance which will carry out coordinated activity in order to solve this issue. The working group includes representatives of the Ministry of Finance, the Ministry of Economy, the State Property Fund, the Ministry of Infrastructure, the Ministry of Agriculture, the Ministry of Fuel and Energy.
"We thank the German Government for its delegation visit that aims to determine how Germany's experience can be helpful to the Ministry of Finance and government in this area, and we express our confidence that the presence of international partners will help us to implement best practices of effective fiscal risks management during the budget process," - stated the Minister of Finance of Ukraine Natalie Jaresko.