Ukraine entered the year 2025 with difficult financial challenges, but with quite clear ones forecasts regarding its economic development. GDP growth is expected at the level of 2.7%. At the same time, the inflation rate is predicted at the level of 9.5%, which remains high, but significantly lower than the peak indicators of previous years.
The main source of budget revenues remain tax revenues. The government expects a significant increase in personal income tax (+ UAH 158 billion) and corporate income tax (+ UAH 21.8 billion), which should become a financial basis for financing state needs
But the key question remains the risk of budget revenue reduction. Prolonged war drains the economy, increases unemployment and forces the government to rely on international aid. Problems can also arise due to the possible delay of external tranches and instability in tax revenues. High inflation can reduce the purchasing power of Ukrainians, which will have a negative impact on VAT – one of the main sources of filling the budget.
The situation with international aid
Ukraine continues to rely on international financial aid to support the economy and cover the budget deficit. Until recently, the main financial donors remained The EU, the USA and the IMF, which last year already provided Kyiv with 41.7 billion dollars, of which 12.6 billion came in the form of grants.
Currently, Ukraine has once again found itself at a point where not only its future is being decided, but also the future of the entire international security system. The decision of the administration of Donald Trump on suspension of military aid – a new reality in which Kyiv is forced to look for support where they are still ready to provide it. The planned $38.4 billion in external funding is turning from a figure on the budget to another front of struggle – this time diplomatic and economic.
America has always been a key partner of Ukraine. But a key partner does not mean reliable. Washington politics has always depended on the personal decisions of those in the Oval Office. Today, this cabinet belongs to Donald Trump, who has already shown that he has no feelings for Ukraine. His administration froze the supply of ammunition and military equipment, which means that the Ukrainian army may face a shortage of resources at the most critical moment of the war.
Europe understands that Trump’s decision weakens not only Ukraine, but also the Eurozone itself, but it is traditionally slow to act. EU leaders they speak about the need for financial support of Kyiv, there is still no clear strategy on how to compensate for the losses. Meanwhile, the Ukrainian budget continues to depend on unstable external revenues, and the economy on political decisions made far outside the country.
So, although the financial cushion of $40.3 billion in international reserves provides some margin of safety, Ukraine cannot afford delays or cuts in external financing. Any delays could jeopardize pension payments, public sector salaries and defense spending. The government is preparing for possible scenarios and looking for new financial solutions, but the issue of international support and its timely arrival remains key.
Policy of the NBU regarding the exchange rate and gold and foreign exchange reserves
Financial stability of Ukraine in the current year will depend and from the policy of the National Bank regarding the exchange rate and management of reserves. Currently, the country’s gold and foreign exchange reserves amount to 40.3 billion US dollars, which was already discussed above. This is enough for the current balance of the market, but it is not known whether they will be enough in the long term.
NBU in its Strategies for softening currency restrictions involves a gradual transition to a more flexible course formation. This means that in the future the hryvnia will depend more on market factors than on artificial restrictions. At the same time, the NBU predicts that by the end of this year reserves will amount to about 41 billion dollars, which should guarantee a certain level of stability of the foreign exchange market.
However, the risks remain significant. This year’s budget deficit of 38 billion dollars can press to the hryvnia, especially if external financing is delayed. In this case, the government may consider issuing hryvnia, which will automatically lead to a weakening of the national currency. The experience of 2022 showed, that excessive printing of the hryvnia is the way to an inflationary surge, which will hit the purchasing power of citizens. At the same time, the financial regulator has the resources to keep the exchange rate relatively stable, especially if international assistance is received in time. The main challenge is to balance monetary policy in such a way as to prevent sharp devaluation and endanger economic stability.
Debt pressure on Ukraine: between financial stability and crisis risk
IA “FACT” already wrote that the national debt of Ukraine is approaching critical levels this year. As of January 31, the total public debt of Ukraine, including guaranteed liabilities, reached 7.07 trillion hryvnias, which is equivalent to 168.99 billion US dollars. The main part of this amount is external debt – 5.14 trillion hryvnias, or 122.93 billion dollars, which is 72.74% of the total debt. At the same time, domestic debt obligations reach 1.93 trillion hryvnias, which corresponds to 46.07 billion dollars and is 27.26% of the total state debt.
According to forecasts, the national debt will exceed 8.2 trillion hryvnias, which is equal to 97% of GDP, and according to IMF estimates, it may even exceed 100% of the country’s gross domestic product. This means that the state actually works in a mode where most of the value produced by the economy is already laid in debt obligations.
Ukraine found itself in a dangerous debt trap. The total public debt already exceeds the economically safe level, which makes the country vulnerable to any financial shocks. 72% of this amount is denominated in foreign currency, so every fall of the hryvnia automatically increases the debt burden. This means that the stability of the economy now directly depends on external borrowing.
Can the government cope with such a debt? In 2025, more than 600 billion hryvnias will be needed for its maintenance alone. This amount is unsustainable without external assistance. Western partners are still ready to support Ukraine, but there are no guarantees of uninterrupted financing. If money from international creditors starts to lag, the authorities will face a tough choice: either start the printing press, which will cause a jump in inflation, or cut public spending, including on defense and the social sphere.
Therefore, the conclusion is obvious: without a tough debt policy, we will be on the verge of a financial disaster. Ukraine cannot afford uncontrolled debt growth. Each subsequent loan must be calculated to the last penny, otherwise the risk of chronic instability will become a reality. This is not a question of economic theories – it is a question of the country’s survival.
…Ukraine has entered a new economic reality, where tax policy is becoming tougher, and the burden of reforms falls on the shoulders of citizens and businesses. The military levy was raised to 5%, which inevitably reduces the income of Ukrainians. The banking sector will now pay half of its profits to the state, and tax audits are returning, a reminder of the growing control. Customs is going through a reform: digitalization and the fight against corruption are ambitious, but painfully familiar promises.
Citizens of Haiti, farmers, small businesses – no one will be left out of the changes. Against the background of frozen salaries, pensions and social benefits depreciating under the pressure of inflation, the purchasing power of citizens melts like snow in spring. Defense financing has reached an unprecedented level – 2.2 trillion hryvnias, which is equal to a quarter of GDP. The main expenses are for the salaries of the military and the purchase of weapons, but will the budget withstand this burden without international aid?
The question of the return of Ukrainians from abroad remains a rhetorical one: 150 million hryvnias for these events is more of a symbol than a real incentive. Without a significant improvement in the economy and competitive wages, most refugees are unlikely to rush home.
We will talk about all this next time.
Tetyana Viktorova
