Ukraine—EU for Stronger Public Finance Systems of Local Governments (LOGICA)

Client: European Union

Duration: 2017-2020

Region: Eastern Europe and Central Asia

Country: Ukraine

Solutions: Governance

In April 2017, the Government of Ukraine released a Medium-Term Government Priority Action Plan up to 2020. Among the five main goals of the plan was achieving effective governance, as a result of the public administration, decentralization, and public finance reform.

In addition, through signing the Association Agreement (AA) with the European Union (EU) and its participation in the International Monetary Fund programme, Ukraine committed to improving its public financial management and modernizing its institutions. The Government engaged in extensive public administration and fiscal decentralization reforms to ensure efficient and transparent use of public budgets.

The EU for Stronger Public Finance Systems of Local Governments project supported the Government of Ukraine to attain sustainable economic and development goals by increasing the efficiency and transparency of the local financial management systems, in line with the EU-Ukraine Association Agreement and Ukraine’s Public Finance Management Strategy of 2017–2020. The purpose of this intervention was to strengthen fiscal decentralization and accountability at local and regional government levels.

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Sample Activities

  • Establish programme based local government budgeting and accounting processes.
  • Amend the Budget Code and Tax Code of Ukraine to streamline funding of delegated powers.
  • Develop and IT solution for integrated budget and accounting system to increase the capacity of the Ministry of Finance to exercise the fiscal surveillance function linked to local government borrowing.
  • Boost internal control and audit function at the local level to establish an effective oversight over local budgets

Sample Results

  • Local governments strengthened their role in generating the gross domestic product (GDP) of the country thanks to the creation of conditions that motivated local governments to increase the revenue base of local budgets—the share of local budget revenues (excluding intergovernmental transfers) in the GDP increased from 6.5 percent in 2014 to 7.6 percent in 2019.
  • Introduced the medium-term budgetary framework (MTBF), ensuring its clear links with sectoral plans and improving the efficiency of local expenditures. The introduction of the MTBF was one of the priorities of the Government of Ukraine and the Ministry of Finance, incorporated into the 2017–2020 Strategy of Reform of the Public Financial Management System.
  • Developed an IT tool called Information-Analytical System for management and planning of local budgets (LOGICA) for the Ministry of Finance to manage budgetary operations across different systems used by local governments. The IT tool ensures better monitoring and supervision of the process by the Ministry to oversee the local government budget preparation and facilitates the analytical needs of the Ministry.
  • Supported the Ministry of Finance with various revisions and amendments on current legislation and fiscal guidelines, including recommendations to Draft Law No. 8044 “On Amendments to the Budget Code of Ukraine Relating to Medium-Term Budgetary Framework,” a Standard Form of a Local Budget Forecast, preparation of Local Budget Forecast Guidelines
  • Created a guide for journalists and citizens that uses an accessible and understandable format for presenting information on the budget process, its stages and time frames, and content of the budget documents.
  • Delivered the first-ever Sub-National Public Expenditure and Financial Accountability (SN PEFA) Assessment Report for Ukraine.
  • Developed a comprehensive training programme and training materials for local spending units and delivery of reflective training.
  • Developеd an online training programme called “Modernization of Accounting and Financial Reporting in the Public Sector: Application of National Accounting Standards.”
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