Last time IA Fact wrote about the economic challenges facing Ukraine: the war is draining the budget, unstable incomes are creating additional tension, and international support is increasingly turning into a political battleground. The projected GDP growth of 2.7% is an insignificant statistic when the economy depends on external infusions. Inflation is 9.5% – less than in previous years, but prices are rising, and the purchasing power of our compatriots is falling.
The basis of the budget should be tax revenues, but here everything depends on two factors: the stability of the economy and business support. If international partners slow aid, the government will be left alone with massive financial problems. The planned 38.4 billion dollars of external financing are not numbers on paper, but a matter of survival.
And the main risk is a debt crisis. 7.07 trillion hryvnias of state debt already, and by the end of the year it could be 100% of GDP. Debt payments of 600 billion hryvnias without external support are either an inflationary shock due to money printing, or a sharp reduction in government spending.
And while Europe is thinking, and Trump has already decided to freeze military aid, the Ukrainian government is forced to look for alternatives. There will not be enough money for everything, and the main question is what to save on: defense or welfare? Because without external infusions, gold and foreign exchange reserves of 40.3 billion dollars will not save for a long time.
New tax initiatives to increase budget revenues
Ukraine entered in 2025 with large-scale tax changes designed to increase budget revenues, improve tax administration and fight corruption. The authorities are forced to look for new sources of filling the state treasury, and this means that both businesses and ordinary citizens will feel the tax burden more than ever.
The main change, which has already affected the salaries of Ukrainians, is the increase in the military levy. Since December 1 of last year raised from 1.5% to 5%, and now it applies not only to employees, but also to FOPs. It is expected that this tax will bring billions of hryvnias to the budget, but at the same time it will reduce the real incomes of Ukrainians.
The banking sector is also in trouble, because the income tax for financial institutions has been increased to 50%, which will significantly affect their profitability. And the government has decided to resume tax audits, which can be a strength test for small and medium-sized businesses.
Ukrainian customs has long been one of the most corrupt state bodies, and the current year should be a turning point in its reform. The Verkhovna Rada has already adopted a law that provides complete “reboot” of the customs service – a transparent competition for the position of head, audit of activities and mass re-certification of all customs officers. time will tell whether it will be possible to eradicate schemes that “eat up” billions of hryvnias every year. In addition, customs is waiting digitization – automation of processes, electronic document flow and salary increases for customs officers who have been “cleansed” of corruption
The new rules will affect IT workers, farmers and small entrepreneurs. In particular, changed taxation of Diya City residents, which should stimulate the development of the digital economy. In addition, the agricultural sector will face with new tax obligations, which will naturally affect the cost of products.
On the one hand, Ukraine is taking important steps to improve tax discipline and fight corruption. On the other hand, fiscal pressure is increasing, which can affect business activity and citizens’ incomes. The pressing question: will these reforms help fill the budget without harming the economy? The answer will depend on how effectively the government can implement them.
Wages and social benefits
In the current year, our compatriots will have to tighten their belts even tighter – the state freezes the growth of salaries, pensions and social benefits, explaining it by the war and a record budget deficit. Despite the rapid rise in prices, the minimum wage will remain at the level of 8,000 hryvnias, and the subsistence minimum is 2,920 hryvnias. This means that people’s real incomes will actually decrease and their purchasing power will continue to fall.
From March 1 took place indexation of pensions. For social payments in the budget laid down 419.2 billion hryvnias, of which 237.9 billion will go to pensions. But will these resources be enough in the event of a lack of international funding?
Last year there were cases of interruptions with social security payments, and it seems that the situation may be the same this year to repeat. The state budget is catastrophically dependent on international aid, and if even one tranche is delayed, the government will have to choose between financing the army and payments to the population. The Ministry of Social Policy already states that payments are made on time, but minor delays are possible due to the priority of military expenditures
The state tries to maintain social standards, but in reality they no longer correspond to reality. With rising prices and possible delays in international funds, the risks for payments only increase. Ukrainians will have to adapt to difficult conditions, and state employees and pensioners will actually have to survive in conditions of financial stagnation.
Financing of the defense sector
In the current year, every fourth hryvnia from the budget will go to the army. Defense expenditures will reach 2.2 trillion hryvnias – this is a record amount in the history of Ukraine, which is 26% of GDP. The state is betting on military superiority and the maximum strengthening of the Armed Forces.
How has funding changed? Compared to last year, the defense budget increased by 510 billion hryvnias. This is a serious increase, which reflects a new strategy – a bet not only on defense, but also on strengthening the striking capabilities of the Ukrainian army.
Where will go this money 1.16 trillion hryvnias are earmarked for the payment of salaries to the military – this is the lion’s share of the budget, although the rate of increase in monetary support remains moderate. Arms spending is increasing, Ukraine is expanding its own weapons production and investing in strengthening air defense. Serious development of defense enterprises is planned – new drones, artillery, and armored vehicles will be created.
It is worth remembering that the defense budget directly depends on international aid, and delays in funding can seriously affect the military strategy. Even with record spending, a significant portion of the funds will go to cover the deficit and repay debts. For now, the authorities are counting on Western partners, but any financial disruptions could become a critical challenge.
This budget demonstrates: rate done on the army and security, and Ukraine has no choice but to fight until victory. But won’t the rest of the economy be sacrificed? Will there be enough resources for critical infrastructure, the social sphere, and economic development? This is a dilemma that is already facing the state, and an answer to it must be sought immediately.
Plans for the return of refugees to Ukraine
One of the key challenges is the return of Ukrainians home. The war forced millions of citizens to leave the country, and now the main question is how to bring them back and give them the motivation to build a future here, not abroad.
What does the state do? In the budget provided for 150 million hryvnias to support Ukrainians abroad and their return. These funds will go for employment, housing and adaptation, but against the background of the scale of the problem, this amount looks rather symbolic. It’s a first step, but it’s too small to make a real difference.
Are there jobs for those who return? Ukrainian labor market feels acute shortage of personnel, especially in industry, construction and medicine. The expected growth of the economy by 4% can to give development momentum, but will domestic salaries be able to compete with European ones? Will international support help? In 2025, Ukraine expects to receive $38 billion in international aid. It is a key resource for stabilizing finances and launching business support programs. But it is the creation of jobs and economic stability that will be decisive for the return of people.
Bringing people back is more difficult than losing them. Power declares intentions, but without real change they will remain just words. Ukrainians who have already settled in Europe will not go back to a country where there are no guarantees of stability, security and decent wages. If the state does not offer concrete incentives, we risk losing millions of able-bodied citizens forever. And then the question will no longer be about return – but about who will work for the reconstruction of the country.
… The state is balancing between the need to finance the war, social obligations and a growing debt burden. Economic growth is moderate, and tax reforms currently raise more questions than answers. The main dilemma: how to maintain economic stability in a situation where the financial system depends not only on internal efforts, but also on decisions made far outside the country? Ukraine needs not only money, but also a strategy that will allow it to rely on its own forces, and not only on external support.
Tetyana Viktorova
