For Ukraine, which finances the war primarily through its own tax revenues whilst remaining dependent on international aid, the efficiency of every hryvnia in the budget becomes a matter not only of social policy but also of economic stability. Against this backdrop, the disconnect between the increasing tax burden on businesses and the funding of mass support programmes lacking proper targeting is particularly striking.
The increase in the military levy to 5%, the reinstatement of tax audits and other fiscal measures are accompanied by expenditure of around 45 billion hryvnia per year on programmes, the funds for which are received by broad sections of the population regardless of income level or wealth. These include the ‘Winter Thousand’, one-off payments to pensioners and the ‘National Cashback’ programme.
The ‘Winter Thousand’ scheme provided payments without assessing recipients’ needs, meaning that the same level of support was received by both the most vulnerable sections of the population and citizens with sufficient means. At the same time, the programme’s funding is estimated at 17 billion hryvnias per year — a resource that could have been directed towards systematic support for internally displaced persons, low-income families or the families of fallen soldiers.
A similar problem applies to one-off payments to pensioners. The support covered around 13 million people, including over 1.5 million citizens with pensions exceeding 10,000 UAH. Even a basic means test could have reduced expenditure without cutting support for those who genuinely need it.
The ‘National Cashback’ scheme has sparked a separate debate. According to the Ministry of Economy’s estimates, its impact on the economy in 2024 amounted to just 0.001% of GDP. At the same time, the scheme mainly covers large and medium-sized businesses, leaving a significant proportion of small businesses excluded from the scheme. The annual cost of the programme to the budget is estimated at 5.6 billion UAH.
Against the backdrop of these costs, instruments capable of generating long-term economic benefits are underfunded. In particular, the development of a war risk insurance scheme could help attract investment, revive businesses and create new jobs. According to the Ministry of Economy’s estimates, at least €5 billion is required annually to launch such a scheme.
The proposed solutions include mandatory verification of the income and assets of participants in mass support programmes via state registers, the reallocation of savings to support businesses and insure against war risks, as well as regular public assessments of the effectiveness of state programmes based on clear performance indicators.
In the context of a protracted war, the state’s financial stability increasingly depends not only on the volume of available resources, but also on the ability to direct them where they yield the greatest social and economic impact.