From the 2024 budget to the 2025 budget: what will change in the country’s financial document for each of us
The 2025 budget is an effort to find a balance between the critical needs of the war, support for citizens and ambitious plans to rebuild the country. The government has identified priority spending areas and funding sources, taking into account both internal resources and the support of international partners. What changes will take place in financial priorities and what impact will this have on the lives of Ukrainians? We analyze the key indicators of the budget and their significance for the future of the country.
Once again, we count on the help of Western partners
State deficit budget of Ukraine in 2025 is planned at the level of almost 1.5 trillion UAH, which is 20.6% of GDP. This is slightly more than 19.4% in 2024. To cover this deficit, the government plans to attract state borrowing in the amount of UAH 2.24 trillion.
Of the total amount of borrowing, only UAH 580 billion is expected to be obtained through domestic sources, among them: the issue of domestic state loan bonds. The rest, more than UAH 1.6 trillion, should come from foreign markets, as well as thanks to international financial assistance. Ukraine is counting on significant support from partners, in particular, on attracting $38.4 billion. These plans seem too ambitious given the need to provide guarantees and conditions for such revenues.
High borrowing needs are explained by significant expenses that cannot be covered by budget revenues, as well as the need to finance expenses related to the war, infrastructure restoration, and support of social programs. At the same time, the dependence on foreign markets and donor aid emphasizes the risks that Ukraine may face in the event of a change in the geopolitical situation or the economic situation.
At the same time, expectations of international funding are gradually decreasing. Probably, due to the introduction of new revenue channels proposed by the government.
Infographic: AI “FACT” Infographic: IA “FACT”
We expect revenues thanks to the “resource” bill
Budget revenues for 2025 are calculated taking into account the provisions of the so-called “resource” draft law No. 11416-d, which was approved by the parliament, but the president is dragging his feet on signing it. This document provides for significant tax changes, in particular: an increase in the rate of military tax from 1.5% to 5%, an extension of the tax to individual entrepreneurs working on a simplified taxation system, an increase in the income tax of financial institutions to 25%, an increase in the rate tax on profit of banks by the end of 2024 up to 50%, etc.
Thanks to these innovations, the government expects to receive an additional 126.7 billion UAH in 2025.
In addition, it is planned to direct UAH 63.9 billion of the profits of the National Bank of Ukraine to the budget, which is significantly higher than this year’s figure of UAH 38.64 billion. This increase reflects the growing role of the National Bank in financial support of the state in the face of economic challenges.
We finance cryopreservation of military reproductive cells and support for veterans
The new budget naturally foresees an increase in defense spending. It is planned that they will reach more than UAH 2.22 trillion. The focus of state funding is the development of Ukrainian weapons, drones, equipment and the payment of military personnel.
At the same time, a new budget appears article: for the year 2025, 190 million hryvnias are provided for the preservation of reproductive cells of military personnel. According to the Minister of Health Viktor Lyashko, a new program will start on January 1, which will allow state funds to cover the costs of cryopreservation of cells for those who are going to serve in the Armed Forces.
The new budget also covers support for those who have returned from service.
In 2025, the Ministry of Health, together with the Ministry of Veterans Affairs, plans to launch a pilot project aimed at improving the medical support of veterans at the level of primary medical care. As part of the project, primary care doctors who have declarations with combatants will receive additional payments. At the same time, veterans will have access to an expanded list of services. Among them: family doctor patronage, individualized treatment and examination plans, as well as treatment of neurological disorders and chronic pain. The initiative is aimed at improving the quality of medical services and providing comprehensive support to those returning to civilian life after hostilities.
We support socially vulnerable categories
The draft budget for 2025 includes UAH 419.2 billion to support socially vulnerable population groups. From this amount, UAH 237.9 billion will be sent to the Pension Fund for the payment of pensions. I am glad that they are scheduled to be indexed in March 2025. In addition, it provides:
– UAH 127.9 billion for financial assistance to low-income families and people who find themselves in difficult life circumstances. This category receives support to ensure basic needs and a minimum standard of living.
– UAH 42.3 billion for benefits and subsidies that will help citizens pay for housing and communal services and reimburse other basic expenses.
– UAH 6.7 billion for social protection of persons with disabilities, which provides assistance to cover medical, rehabilitation and other specialized needs.
We finance education, science, culture
Almost UAH 170 billion is provided for the education sector in the new budget. These funds will be used to pay teachers, provide students with grants for higher education, create and distribute textbooks, and organize healthy meals for students.
In addition to education, considerable attention is paid to the development of other key areas:
UAH 9.6 billion is provided for the support of culture and information space, which includes financing of cultural projects and events.
UAH 4 billion is planned for digital transformation. Part of these funds is directed to innovative projects for the defense sector, in particular the BRAVE 1 initiative, which focuses on technological developments for the security sector.
UAH 14 billion will be allocated for scientific research, especially in the fields of the defense-industrial complex, energy and energy efficiency, which should contribute to technological progress and solving current challenges in these areas.
We are waiting for a big privatization
In the new year, a new management model for public investment projects is expected to be used, which will allow more efficient use of capital expenditures, focus on infrastructure restoration, energy projects, etc.
Programs of preferential lending, subventions to local budgets and grants for entrepreneurs will continue to operate. This stimulates the development of the economy even in the conditions of war.
The process of restoring large-scale privatization has already begun. Although modest revenues of UAH 3.2 billion are planned for 2025, the government expects to overachieve due to the sale of large state-owned properties, such as the Ukraina hotel
And what about the 2024 budget?
Current budget of Ukraine largely depends on tax revenues, which make up 60.63% of all revenues (over UAH 1.5 trillion). This indicates the critical role of economic activity and the tax collection system in ensuring state financing. At the same time, non-tax revenues (28.24%) provide a significant part of resources, which includes revenues from state assets and administrative services. International support, in particular contributions from the European Union, is almost 11%, demonstrating the importance of external resources for the Ukrainian economy.
The priority is defense, to which 46.35% of all expenditures (over UAH 1.49 trillion) are directed. This is expected in the conditions of war, when it is necessary to ensure the military needs and security of the state. The next largest funding is the public order and security sector (14.16%), which includes support for law enforcement structures. The remaining articles, including health care (4.96%) and economic activity (4.31%), receive much less resources.
Infographic: AI “FACT” Infographic: IA “FACT”
The infographic shows the dynamics of the main indicators of the state budget of Ukraine by month: revenues, expenses and deficit/surplus. During the specified period, there is a stable advantage of expenses over income, which causes a constant budget deficit. The largest gap between revenues and expenditures was noted in December 2023, which is traditionally associated with the end of the fiscal year and active budget expenditures.
In the first half of 2024, the deficit trend continues, although the fluctuations become less sharp. There is hope for a gradual stabilization of the financial balance, while the need for external and internal borrowing to cover the deficit still persists.
Infographic: IA “FACT”
In conclusion, Ukraine’s 2025 budget is a cause for concern due to its dependence on foreign borrowing and international aid, which makes the country vulnerable to changes in the global political and economic situation. High levels of debt and the need for new tax changes suggest the government will likely continue to seek a balance between war funding, welfare payments and infrastructure rebuilding. At the same time, issues of cost efficiency, fight against corruption and real possibilities of privatization remain without sufficient guarantees of success. Without real structural reforms and a stable economic policy, Ukraine risks facing further economic difficulties.
