We are publishing the critical points of the speakers’ reports.
In 2023, global changes to the state budget included increasing spending on the security and defense sector by redistributing military personal income tax from local budgets to the state budget.
The 2024 budget was planned based on data that did not take into account actual expenditures. Due to problems with US military aid, Ukraine redirected UAH 213 billion to purchase military equipment, which led to the need for additional budget amendments.
The new package of tax changes envisaged revenues of UAH 125 billion, but expectations were lowered to UAH 30 billion. After the first reading, when the tax on banks was added, the projected revenues increased to UAH 58 billion in 2024.
The exchange rate 2024 is set at UAH 41.4 per dollar and for 2025 at UAH 45. The over-execution of import VAT and international financial support balance possible risks.
The expected revenues from the tax package for 2025 amount to UAH 126.7 billion.
The revenues of budgetary institutions in 2023 amounted to UAH 812 billion, one-third of all revenues. Most are in-kind aid accounted for by defense and security sector budget holders. The revenues of budgetary institutions also include funds on particular accounts of the NBU and classical revenues (charitable contributions, etc.).
In 2025, the Ministry of Finance plans to return funding for roads, which has raised concerns about the possibility of inefficient use of funds in a time of war.
Last year, all sources of funding for the road fund, including excise taxes, were directed to the general budget fund to meet defense needs, and road infrastructure was maintained from the government’s reserve fund at the military’s request.
In its proposals for the draft state budget for 2025, the government plans to allocate UAH 42.5 billion for road construction, including repayment of Ukravtodor’s debts.
There is a strict and unwavering rule that funds received from international partners cannot be used for defense.
The situation with external assistance:
– Ukraine’s need for external financing for 2025 is $38.4 billion;
– EUR 12.5 billion from the EU under the Ukraine Facility and USD 2.7 billion from the IMF have been confirmed so far;
– The EU intends to provide €35 billion (about $39 billion) in the form of a non-repayable loan secured by the proceeds of Russian assets – part of the $50 billion financing mechanism for Ukraine announced by the G7 countries;
– in 2026, funding from the EU will amount to 7.25 billion euros, from the IMF – 1.9 billion dollars;
– the need for funding for Ukraine in 2026 will remain significant even if the war ends.
The lack of the rule of law is a severe obstacle to the country’s economic development, which reduces the attractiveness of the investment climate, even during the war.
Defense expenditures should be correlated to the enemy’s 1 to 3 to ensure sustainability in a protracted conflict. Ukraine meets this level, but increasing spending efficiency remains essential.
This discussion was created by CASE Ukraine with the support of Ednannia within the framework of the project “Sectoral Support Initiative for Civil Society in Ukraine”, implemented by Ednannia in consortium with the Ukrainian Center for Independent Political Research (UCIPR) and the Center for Democracy and Rule of Law (CEDEM), thanks to the generous support of the American people through the United States Agency for International Development. This discussion does not necessarily reflect the views of ISAR Ednannia, the United States Agency for International Development, or the United States Government.