On August 6, at the Government session the draft Law of Ukraine “On Introduction of Changes to Budget Code of Ukraine” (concerning the implementation of a new model for inter-budgetary relations) was approved.

Introduction of changes into the Budget Code is necessary for implementation of a new model of interaction betweed the state and local self-government bodies based on principles of financial decentralization and strengthening of financial potential of local self-givernment. 

The system of local self-government at the local level is inefficient. It substantially hampers economical development of the state. The first step towards reformation in this field was the approval of the Concept of reforming of local self-governance and territorial organization of authority.

Successful implementation of local self-government reform is directly related to changes in other fields. This concerns, first of all, budgetary-fiscal reform, as well as such spheres as education, healthcare, social support, implementation of financial decentralization policy, improvement of inter-budgetary relations in the areas of local budget replenishment for providing high-quality administrative and social services to the public, etc.

The project defines the key directions of changes, which, in their turn, define the new model of financial provision of local budgets and inter-budgetary relations. These directions include: 

• Ensuring budget autonomy and financial independence of local budgets;
• Stimulating of communities’ unification and formation of capable territorial communities;
• Assigning stable income sources to local budgets and extension of local budgets’ income basis;
• Defining a new mechanism for budgetary regulation and equalization;
• Providing new types of transfers and strengthening of liability of profile ministries for implementation of state policy in their respective industries;
• Decentralization of allocation responsibilities and strict distribution of competencies, based on subsidiarity principle.

The Draft Law will be presented to Verkhovna Rada for consideration.