projections to 2025

TABLE 2.2 Central government health spending, including transfers, projections to 2025

AS % OF GDP CURRENT PRICES (UAH, BILLIONS)

SIMULATIONS

GDP, CURRENT PRICES (UAH BILLIONS)a ACTUAL/PLANb SIMULATIONS ACTUAL/PLAN IMF GDP PROJECTIONS GOV GDP PROJECTIONS

YEAR IMF GOV IMF GOV 1 2 3 GOV 1 2 3 1 2 3

2015 1,988.5 1,988.5 3.2 3.2 — — — 63.3 — — — — — —

2016 2,385.4 2,385.4 2.4 2.4 — — — 57.2 — — — — — —

2017 2,982.9 2,983.9 2.6 2.6 — — — 78.7 — — — — — —

2018 3,560.6 3,558.7 2.5 2.5 — — — 87.4 — — — — — —

2019 3,974.6 3,978.4 2.5 2.5 — — — 97.7 — — — — — —

2020 3,869.7 3,985.5 3.6 3.5 — — — 141.0 — — — — — —

2021 4,205.1 4,505.9 3.8 3.6 — — — 161.0 — — — — — —

2022 4,571.4 5,089.4 — — 3.5 3.6 3.8 — 158.9 166.5 175.1 176.9 185.4 194.9

2023 4,972.7 5,689.7 — — 3.4 3.6 3.8 — 168.0 181.2 190.4 192.3 207.3 217.9

2024 5,420.5 — — — 3.3 3.6 3.8 — 177.9 197.5 207.6 — — —

2025 5,918.3 — — — 3.2 3.6 3.8 — 188.5 215.6 226.6 — — —

Sources: State Treasury Service of Ukraine (actuals); Annual Budget Laws (plan); CabMin (GDP); IMF 2020 (IMF projections). Note: — = data not available; GDP = gross domestic product; GOV = government; IMF = International Monetary Fund; SNG = subnational government. a. GDP projections being 2020. b. Budget totals reflect actual execution statistics for 2015–19, planned amounts for 2020–21, and projections beyond 2022.

Scenario 2 and UAH 217.9 billion under Scenario 3 by 2023. However, if general expenditure consolidation to the 2015 level, as suggested by the IMF, is translated into an equal, gradual reduction of spending on health (Scenario 1), the nominal health allocation might actually contract in 2022 or grow modestly.

Regardless of the economic trajectory in the next few years, extra revenue could be collected through improved tax and customs administration. Ukraine already redistributes a significant share of its GDP through state taxation and spending. In 2019, even after the significant postcrisis fiscal consolidation, the share of public spending in Ukraine was 41.51 percent, which is higher than the average for advanced economies. This makes it difficult to extract additional taxes without a significant accompanying improvement in the quality of public services in the larger role of the state. On the other hand, the 2019 assessment by the IMF suggested that revenue collection could be significantly expanded through reforms in the organization, management, and oversight of the tax and customs systems.

It is also possible to consider additional health-related taxation, including higher taxes on alcohol consumption and tobacco consumption, as well as introducing taxes on saturated fat, salt, and sugar consumption: • Alcohol taxation. Higher alcohol taxation is currently not on the table, but it might be considered in the longer term, both from fiscal and health perspectives. On the one hand, alcohol consumption in Ukraine declined substantially between 2010 and 2016, from 14.3 liters of pure alcohol per year to 8.6 liters, or by 40 percent, at which point drinking became less prevalent in

Ukraine than in the EU13 countries, the United Kingdom, Spain, Moldova,

Belarus, or Russia.20 On the other hand, alcohol remains one of the leading mortality risk factors for young adults 15 to 49 years old, causing 31.8 percent of deaths in this age group, with 35.1 percent of deaths among men. • Tobacco taxation. In the past decade, Ukraine has been highly successful in using tobacco taxation to create new budget revenue and improve public health outcomes. The government has raised tobacco taxes regularly since 2008, most actively during 2014–16 to around 40 percent annually. In 2017, it approved a 7-year plan to continue raising tobacco taxes by approximately 20 percent every year until 2024 to ultimately harmonize the tobacco tax structure and increase rates to the EU minimum to counteract fraud and illegal cross-border trade. As a result, revenues from tobacco taxes grew from 1.18 percent of GDP in 2011 to 1.55 percent of GDP in 2020. These significant tax increases, combined with a range of antismoking measures, have decreased the prevalence of tobacco use from 28.4 percent in 2010 to 23.0 percent in 2017, from 49.9 percent to 40.1 percent among men. However, as of 2019, the

MoF expected that the tobacco tax proceeds would continue to expand in the medium term despite reduced consumption, which makes it a win-win strategy, bringing budget revenue along with public health benefits. • Saturated fat, salt, and sugar taxation. While mortality attribution to tobacco and alcohol consumption is declining, obesity is a growing risk in Ukraine. The share of mortality attributed to the high body mass index steadily increased in the past decades, from 12.6 percent of all deaths in 1990 to 15.5 percent in 2014.

Another factor is the growing share of mortality caused by diets high in sugar-sweetened beverages, processed meat, red meat, and trans-fatty acids. Even though each of these risks is responsible for less than 1 percent of all deaths, their attribution has been steadily increasing since 2001. The WHO 2018