Cities may lose up to UAH 13 billion due to the abolition of the reverse subsidy: causes and consequences
18 November 17:55
ANALYSIS FROM 
The population of cities should be prepared that after the reverse subsidy is canceled, the standard of living may deteriorate significantly. This opinion was expressed by lawyer and analyst Andriy Vigirinsky in his speech. According to him, a vote on the draft budget will soon be held, in which the government proposes to withdraw the reverse subsidy from local budgets in the amount of UAH 12.9 billion.
“The Association of Cities is already asking how to create rehabilitation centers for the wounded, provide first aid stations, a heating period, and observe a moratorium on raising tariffs under these conditions, because without support from the municipal treasury, the functional activity of housing and communal services will be in question,” says Vigirinsky.
Which cities may suffer the most and how the withdrawal of subsidies will affect citizens
Lawyer and analyst Andriy Vigirinsky exclusively for
“Territorial communities provide the conditions for our daily life: roads, lighting, heating, minor repairs. All of these services are provided at the expense of local budgets,” the analyst said.
Mr. Vigirinsky also recalled the address of the mayor of Lviv, who said that Lviv would lose about UAH 2 billion due to the new budget changes.
“Lviv is a city with a heavy burden on social infrastructure due to internally displaced persons. This includes healthcare and social services, and when there is a lack of funds, these problems will remain unresolved,” explains Vigirinsky.
The biggest risk for cities: which issues will be the most difficult
The analyst also gave an example of the situation in Dnipro, where the amount of 13 billion hryvnias will be reduced by 3 billion. Mr. Vigirinsky emphasizes the need for a permanent subsidy for utilities, as companies are operating at the edge of profitability due to high natural gas prices.
“The population does not pay for housing and communal services, creating a debt of 60 billion hryvnias. At the same time, local budgets have a deficit due to low tariffs,” adds Vigirinsky.
The lawyer also noted that the situation with financing may lead to the fact that local communities will not be able to perform functions that ensure the well-being and livelihood of the population. According to the analyst, the functions will not be performed properly, and even in times of war, people may not be able to wait for the repair of their yards or playgrounds. According to Vigirinsky, this situation should be taken into account when adopting the budget.
“Local communities cannot be deprived of these financial resources, and the Presidential Office should take this into account in its policy,” he emphasized.
What do MPs say?
MP Nina Yuzhanina specially for
“This was necessary in order to direct the excess funds per local resident not to the state budget, but directly to support those communities that are unable to meet their needs on their own,” explained Yuzhanina.
Nina Yuzhanina also noted that in the framework of decentralization, local communities received more powers to distribute funds independently. However, according to the Ministry of Finance, it is impossible to do without reverse subsidies. According to her, the reverse subsidy has become the basis for decentralization of the distribution of funds between local and state budgets.
The MP also draws attention to the fact that local budgets are actively responding to various challenges. However, she emphasized that before the second reading of the budget, the government did not pay enough attention to the distribution of funds, in particular, to the reverse subsidy. Yuzhanina also cited the example of Kyiv, where a large number of people from the suburbs work.
“People work in Kyiv but live in the suburbs. Their taxes go to the capital’s budget, even though they do not live in Kyiv,” she explained.
Therefore, this issue requires a thorough calculation and understanding, as it has an impact on the distribution of budget funds. The MP also noted that the very concept of reverse subsidies is not new, and therefore it is not entirely clear what the deterioration of the situation is.
“It is a strange concept when the better-off have to give to support the less well off,” she concluded.
In conclusion, Yuzhanina called on the government and other authorities to address global issues, as the situation is getting worse for everyone every day.
Thus, the abolition of the reverse subsidy will be a serious challenge for many Ukrainian cities, especially for regional centers, which already have problems with financing social and communal services. As noted by lawyer and analyst Andriy Vigirinsky, such a change in the budget could lead to a significant deterioration in the quality of life in cities, as local budgets will be left without the necessary resources to operate important social infrastructures such as medical facilities, educational institutions and utilities. At the same time, Nina Yuzhanina, MP, also notes that decentralization envisaged a certain independence of communities, but without this type of funding, communities will be forced to cut social programs and services for the population, which will have a negative impact on people’s living standards. Therefore, the government needs to seriously consider these factors when adopting the budget.
Author – Daryna Glushchenko
