Analysis of the Draft Law:
Analysis of the Draft Law of Ukraine on Amendments to the Budget Code of Ukraine Regarding Transactions with Contingent Liabilities
Essence of the Draft Law:
The draft law proposes amendments to the Budget Code of Ukraine to regulate transactions with contingent liabilities that may arise within international financial agreements. The main objective is to define mechanisms for managing such liabilities, including the possibility of limited creditors’ rights to demand loan repayment from the state.
Draft Law Structure and Key Changes:
- Amendments to the first part of Article 2, which defines the concepts of debt obligations and public debt, including contingent liabilities.
- Supplementing the “Final and Transitional Provisions” section with new points that empower the Ministry of Finance with Debt Agency functions until its launch and establish the procedure for transactions with contingent liabilities.
Key Provisions Important for Legislators, Experts, Businesses, and Citizens:
- Defining contingent liabilities as part of public debt that may create new financial obligations for the state upon certain conditions.
- Establishing the powers of the Ukrainian Debt Agency, which will be responsible for managing these obligations, including maintaining a registry and informing the government about new obligations.
- Providing a mechanism for using frozen Russian Federation assets to repay such obligations, which may significantly impact Ukraine’s financial stability.
- Providing for the possibility of waiving sovereign immunity in disputes regarding these obligations, which may affect Ukraine’s international relations.
Explanatory Note Analysis:
Analysis of the Draft Law of Ukraine “On Amendments to the Budget Code of Ukraine Regarding Transactions with Contingent Liabilities”
Essence of the Draft Law:
This draft law proposes amendments to the Budget Code of Ukraine to create a legal basis for attracting loans to the state budget. Loans will be financed from future proceeds of frozen Russian assets, which will allow servicing and repaying such debt obligations.
Reasons and Necessity for Adoption:
The draft law was developed in response to a collective decision by the EU and G7 countries to provide loans of up to 45 billion euros to Ukraine. These loans will be serviced using frozen assets of the Russian Central Bank. Considering the G7 initiative “Emergency Loans to Accelerate Budget Revenues for Ukraine,” Ukraine needs a legislative mechanism to attract such loans to effectively finance priority budget expenditures.
Key Consequences:
Implementing this law will allow Ukraine to receive significant financial support necessary to meet urgent budget needs arising from armed aggression by the Russian Federation. For businesses and citizens, this means potential improvement in economic stability and infrastructure restoration. The transparency of debt policy ensured by maintaining the Contingent Liabilities Registry is also important. The draft law does not require additional budget expenditures but may lead to long-term debt obligations if Ukraine does not receive reparations from Russia.
Analysis of Other Documents:
Analysis of Documents Regarding the Draft Law of Ukraine on Amendments to the Budget Code of Ukraine
1. Author’s Position
The document’s author, the Cabinet of Ministers of Ukraine, supports the proposed draft law. This is confirmed by the fact that the draft is submitted as a legislative initiative for consideration by the Verkhovna Rada and is accompanied by a resolution on adopting the draft law as a basis.
2. Key Document Provisions
The draft law concerns amendments to the Budget Code of Ukraine regulating transactions with contingent liabilities. This may be important for legislators and experts as it potentially changes the state’s financial obligations and their regulation. For businesses and citizens, this draft law may impact the transparency and predictability of public finances, which in turn may contribute to the stability of the economic environment. Additionally, the draft indicates the need for further refinement considering comments and proposals, demonstrating openness to discussion and improvement of the legislative initiative.
