Subvention for socio-economic development: how to stop public funds allocation according to political preferences

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The very first time when subvention for socio-economic development appeared in the Budget was 2005. The total amount of subvention for the period of 2007-2017 is 25,6 billions of hryvnias measured in 2017 prices.First and foremost aim of the subvention is economically reasonable support of infrastructural projects on the regional level. However, in practice subventions are transferred to regions where local branches of parties that belong to governing coalition are in power. Moreover, amount of funds provided for subventions increases prior to parliamentary or local elections. This what we have found as a result of statistical analysis of the subvention on socio-economic development allocation for the 2007-2017 period. At the same time, there is an alternative mechanism for the subvention on socio-economic development – Regional Development Fund. The fund’s functions are in similar fashion to subvention, while transfers from the fund are made according to clear set of criteria – size of population and gross regional domestic product (GRDP), thus allocation of resources is independent from situation-dependent actions of deputies.