The year 2024 became a turning point for the financial life of Ukraine, exposing one of the most painful points of the Ukrainian economy — dependence on foreign remittances. Foreign remittances, which for a long time supported consumption, the exchange rate and the development of small businesses, have significantly decreased. What used to be a stable source of income for millions of Ukrainian families is now under threat due to global economic changes.
The decline in foreign remittances, which accounted for a significant share of the country’s gross domestic product, has already had a tangible impact on consumption, investment and even social stability. The reasons for this phenomenon are rooted in the international economic crisis, geopolitical tension and increased migration restrictions. For Ukraine, this means new challenges that affect both macroeconomic stability and the well-being of individual households. Such a change in the financial landscape requires not only analysis, but also an immediate response from the state, because the reduction of transfers is not just a statistic. Behind these numbers are human lives, which today require new strategies for adapting to change.
Reduction of foreign remittances to Ukraine: trends in 2024
Foreign remittances have traditionally played an important role in the Ukrainian economy. These financial flows provided income stability for millions of families, supported the domestic consumer market, and contributed to currency stability. However, in 2024, the volume of remittances continued to decline, creating new challenges for the country’s economy.
According to the National Bank of Ukraine, in 2023 the volume of foreign transfers amounted to almost 11 billion US dollars, in 2024 – 8.8 billion dollars, which is 15% less. For comparison, before the full-scale invasion of Russia, in peacetime, Ukrainians received more than 14 billion dollars every year.
Фото: index.minfin.com.ua
For data During the first quarter of 2024, the National Bank of Ukraine operated 21 “funds transfer” payment systems on the territory of Ukraine, including 12 systems created by residents and 9 by non-residents. Through these systems, 2.52 million transfers in the amount of 661.71 million dollars were made to Ukraine. At the same time, the lion’s share of cash flows came from such countries as the USA (18%), Israel (17%), Italy (15%), Germany (9%) and Ireland (5%). The largest volumes of transfers were made through Western Union (43.2%), MoneyGram (21.7%) and PrivatMoney (17.9%) payment systems. However, the total volume of transfers shows a tendency to further decrease.
This trend reflects profound changes in financial support from abroad, which until recently was one of the most stable sources of income for many Ukrainian families. If before the war, foreign remittances played a key role in the formation of domestic demand, stabilization of the exchange rate and the fight against poverty, the current reduction creates serious challenges for the country’s economy.
This means that Ukrainian households are losing billions of dollars that were previously used for consumption, children’s education, business development or agriculture support. At the same time, this is a blow to the national economy, which loses a significant part of foreign currency income, which was an important element of its financial stability.
Causes, consequences, perspectives
Foreign remittances have always been an important element of the Ukrainian economy, but the year 2024 finally emphasized the fragility of this model. The sharp drop in the amount of remittances, which began in 2022, was the result of many factors: the war, the global economic recession, the strengthening of the migration policy in the countries where the majority of Ukrainians work, and the increase in the costs of employees for adaptation to new living conditions. Each of these factors added to the pressure, and their cumulative effect became particularly noticeable in 2024.
The global recession that engulfed the world’s leading economies was the first to hit those sectors in which Ukrainian migrants work. In Europe and the US, where the lion’s share of remittances come from, job and salary cuts have become commonplace. Ukrainian workers, who often occupy unskilled positions in construction, agriculture or the service sector, found themselves in a difficult situation. Their incomes have decreased while costs in host countries have increased due to inflation. This led to the fact that Ukrainians began to send less money home, as they are forced to spend more on their own accommodation.
The strengthening of migration policy in many countries has also become a significant barrier for Ukrainians. European countries revised the employment rules, making the process of obtaining work visas more complicated and expensive. This especially affected new migrants, who found it more difficult to get a job, and those who are already abroad, because increased control and new conditions often require additional financial costs. Workers have to spend money on legalization, instead of sending them back to their homeland.
The war became another important factor that changed the priorities of many Ukrainians abroad. Many wage earners were forced to redirect their resources to support relatives who left Ukraine as refugees. Others spent their savings on adaptation to new living conditions – renting housing, learning a language or obtaining additional education. At the same time, the psychological stress of the war prompted many to leave more funds in host countries, trying to protect themselves from economic unpredictability.
The reduction of remittances has a significant impact on the economy of Ukraine. These funds traditionally supported the purchasing power of the population, stimulated consumption, and ensured the inflow of foreign currency. A reduction in these flows means a reduction in income for many households, particularly in rural areas where dependence on remittances is particularly high. As a result, domestic demand declines and businesses targeting middle- and low-income consumers lose customers. This creates a domino effect that gradually covers various sectors of the economy.
It should be noted that money transfers from abroad historically consisted of three main components. The largest part was personal transfers of Ukrainians to their families, which provided financial stability to millions of households. The second part is the payment of outsourcing services, in particular in the IT sector, which until recently was one of the drivers of the growth of the Ukrainian economy. And the third component was informal flows, which were often associated with currency-laundering schemes, counter-transactions, or fake contracts. According to experts, the latter could make up to 20-25% of the total volume of transfers, although the official statistics of the National Bank prefers to remain silent about this.
Today, all these sources show a sharp reduction. Payments for outsourcing services fell 27.5% in 2024, barely exceeding $5 billion. Official channels for other remittances also saw a decline, reaching less than 5 billion. Informal channels, which have traditionally added a significant percentage to the total, brought in only $3.79 billion. Thus, the total volume of financial flows is at the lowest level for the last decade.
This situation is the result of several parallel processes. First, Ukrainian workers have changed their priorities. Previously, they left their families in Ukraine, sending money to pay for their children’s education, buy real estate or start a business. Today, more and more Ukrainians are taking their children and parents to Europe, spending the accumulated funds on European mortgages or business projects abroad. For many families, this means the final break with the Motherland.
Secondly, the IT sector, which was one of the flagships of the Ukrainian economy, is losing its potential. A decrease in orders, an outflow of specialists and a general contraction of the market undermine its ability to be the main source of foreign exchange earnings. Thirdly, the export of agricultural products, which has always been an important element of the economy, faces logistical difficulties and blockade of ports. Although this problem is only gaining momentum, its effects are already felt.
All this is happening against the background of the absence of a systemic strategy from the state. Ukraine continues to remain trapped in the old commodity model of the economy, in which the main three “whales” — labor transfers, IT outsourcing, and agricultural exports — have already been practically destroyed by the war and global changes. Instead, the government still does not propose a new model of economic development that could compensate for these losses. We still do not have an alternative path of development capable of compensating for losses. This is critically dangerous, because an economy that depends only on external factors risks losing not only financial stability, but also the ability to grow.
Ukrainian refugees, working abroad, pay taxes in host countries, spend their income there and create added value for local economies. At the same time, Ukraine is losing millions of workers who could become the basis for economic recovery after the war. If this process is not stopped, the consequences will be long-lasting: from a reduction in the workforce to a drop in domestic demand and the decline of entire industries. That is why the return of Ukrainians home should become one of the priorities of state policy. This is not only a question of demographic stability, but also of economic security. Returnees not only spend money earned abroad in Ukraine, but also contribute to the development of small and medium-sized businesses, create new jobs and stimulate the local economy.
Therefore, without a clear strategy, which will include economic diversification, return of refugees, creation of new internal drivers and support of small and medium-sized businesses, Ukraine will remain vulnerable to any crises. Because in the modern world, economic self-sufficiency is not only a financial issue, but also a guarantee of state sovereignty. The future of Ukraine depends on the decisions made today. It is long overdue to move from patching holes to building a new economic model based on sustainability, innovation and internal resources. Otherwise, the consequences of the drop in foreign remittances will be only the beginning of a long economic degradation.
