Ukraine : Public Financial Management Performance Report

Abstract

Improvements to the Public Financial Management (PFM) systems in Ukraine, introduced over the last decade, have contributed to improved fiscal management at an aggregate level and helped Ukraine to maintain budget discipline during a period of serious economic and political disturbance in 2008-9. A well established and transparent budget process, a strong centralized Treasury system and improved tax collection provided the foundations for this relatively good performance. Ukraine has a well established budget process that allows for orderly consultations with line ministries and with the legislature. Political events that took place during the period under review resulted in a significant delay in legislative approval of the budget in 2010 that accounts for the lower score compared to 2005. In 2011 budget preparation is back on track. The 2010 budget code which came into effect in the current financial year promises some further strengthening of the links between policy and the budget. Previously government prepared medium term fiscal forecasts, but these did not translate into medium term allocations for programs or ministries and so had little influence on annual budgets. The 2010 Budget Code brings about important improvements, with the introduction of sector expenditure ceilings and a medium term perspective for long term public investment programs. The 2011 Public Expenditure and Financial Accountability (PEFA) assessment is intended to assess changes in PFM system performance between FY 2005 and FY 2010, and to inform the future direction of Government's public finance management reform program. More specifically, this report: (i) provides an updated overview of PFM performance using the PEFA performance measurement framework; (ii) establishes and explains changes in performance compared to the results found during the previous assessment; (iii) reviews Ukraine's PFM performance relative to other counties and related benchmarks; and (iv) assesses the impact of the findings and their implications for the ongoing reform program of the Government.