Where is the budget barge sailing: what does the Audit Chamber’s audit of the implementation of the 2025 State Budget show?
Have you ever wondered what could happen if the engine called “economy” starts to smoke, and the fuel tank, which is the state budget, barely keeps the course under bullets? This budget barge has long been sailing not according to the course, but according to the current. Torn by storms, she is overgrown with seashells, without a compass and a captain holding the helm. The crew is busy squabbling over the cargo instead of patching the holes. And if you don’t change the route, it won’t even arrive until autumn. This is exactly what is happening with the state economy of Ukraine. Behind the screen of loud political statements and optimistic briefings hides the gloomy accounting of the state. The figures published by the Accounting Chamber based on the results of the first quarter of 2025 cut to the core: exports are falling, local budget revenues are falling, budget programs are lagging, and defense spending is eating up everything, leaving no room for development.
Economic dynamics: worrying stagnation instead of recovery
While the Ukrainian state budget carries the burden of the war, the economy stagnates. Analysis of the implementation of the State Budget of Ukraine for 2025 in the first quarter, made public Accounting Chamber, forcing not only to think, but also to be wary. In the conclusion, presented on June 10 by the head of the Accounting Chamber, Olga Pishchanska, there are neither rosy prospects nor attempts to embellish reality, there are only disturbing facts.
When a country loses entrepreneurs, it loses not only jobs, but also tax revenues. In the first quarter of this year, the number of registered FOPs decreased, which immediately hit local budgets and social insurance funds. This is a real hole in the pockets of regions that are trying to survive in conditions of constant underfunding.
It should be noted that the forecast for 2025 promised GDP growth of 2.7%. In reality, we have a miserable 0.5% in the first quarter. At the same time, the main restraining factor was the decrease in exports by 8.7%, in particular food and raw materials, which reduces foreign exchange earnings and weakens the national economy. With grain, everything is clear: war, fields under fire, small harvests. At the same time, problems with iron ore were caused by the fall in world prices. Ukrainian exports fell where they had previously held firm. But there are also new attempts to “rise” through chemistry, mechanical engineering and wood. The share of products with high added value increased to 15.2%, and this is perhaps the only good news in the section on economic dynamics. It is obvious that the state should urgently stimulate the development of domestic production, export logistics and support of small businesses, which are experiencing losses due to the reduction in the number of FOPs.
Budget revenues: dependence on external revenues
The figures in the conclusion of the auditors of the Accounting Chamber look optimistic: budget revenues increased by 44.3% compared to the first quarter of 2024 and reached UAH 926.2 billion. However, this is not because the economy suddenly started working in the country, it happened thanks to international partners and a significant increase in own revenues from defense institutions. In simple words, the army sells, the army earns. And we are also helped by Western donors, their assistance already accounts for 27% of all external revenues. At the same time, almost UAH 20 billion of aid from the EU has not arrived, and this is no longer an error in calculation, but a real threat. Increasing dependence on international aid should be an alarming indicator of fiscal vulnerability, so the delay in the arrival of EU aid only emphasizes this risky dependence. It is probably worth changing the emphasis on sustainable, internal filling of the budget through tax reform, reducing shadowing of the economy and stimulating business activity.
Another “trick” is manifested in the reduction of the tax debt by 12%. However, the problem is that most of this is not a payment, but a write-off through the courts. Simply put, the state “refused” the money, because the tax authorities could not prove their case in court.
Record defense spending, but with delays and debts
It should be noted that UAH 1.2 trillion is the sum of state expenditures in the first quarter, of which 73.5% went to defense. It’s hard to argue with priority when a country is at war, but there are a lot of problems behind that number. First, more than 174 billion hryvnias, which were supposed to go to salaries in the fall, have already been spent on the purchase of weapons. Secondly, overdue receivables increased by 23.6%, and almost 90% are concentrated in the Ministry of Defense. The main reason for this is disruptions on the part of contractors. The supplier companies systematically do not comply with the agreed deadlines for the execution of contracts, violating the schedules of the supply of defense products, delaying the execution of works and the provision of services.
In addition, the financial structure of state budget expenditures reflects the dominance of military expenditures. The largest item in them is spending on the purchase of goods and services — 366 billion hryvnias, of which 287.4 billion went directly to the purchase of military equipment. The second largest amount is payments to the military: the state spent 353.5 billion on accrued wages, and 269.1 billion of them is money support for the military personnel themselves.
The social spending block amounted to 159.9 billion hryvnias — these are various types of benefits and social payments to the population. Another 131.9 billion hryvnias were allocated by the state in the form of subsidies and current transfers to enterprises. Of this amount, 111.8 billion were spent on the purchase, modernization, and repair of weapons, equipment, and military equipment. So, in fact, the current structure of budget expenditures demonstrates the full concentration of resources on supporting the army and securing the front, while part of the resources is regularly stuck due to non-fulfillment of contractual obligations by contractors, which disrupts the deadlines for the execution of defense orders.
The problem of non-performance of contracts is not limited to the defense sector. Disruptions, delays and banal inability to effectively spend already allocated budget funds are evident in almost all large programs. This became especially noticeable in the situation with the fund for liquidation of the consequences of armed aggression. On paper, the government allocated 5.2 billion hryvnias from the remaining funds, i.e. 68.4% of the allocated resource, to the completion of projects that should already be moving towards the final stage. However, the reality looks completely different: at the end of the first quarter, only 100 million were used, the rest of the funds actually lie idle.
Practically the same picture is observed with public investment projects, which are financed by loans raised by the state. Implementation in this direction failed almost completely: only 3.6% of the planned expenditures were financed, and 96.4% of the funds remained on paper. In other words, the money is there, the loans have been issued, but the implementation mechanisms are blocked at the start.
Actually, the Accounting Chamber clearly indicated that the problem lies largely in the work of the executive power itself. Ministries, departments and government structures massively do not perform the basic procedures stipulated by the Budget Code of Ukraine. 73.8% of the procedures for the use of funds, without which financing is legally impossible, have not been approved. It is even worse with passports of budget programs: 28% of all necessary documents have not been approved. These are formal papers that officials had to approve in advance, even before the beginning of the fiscal year. As a result, in the first quarter alone, the planned expenses were not carried out and loans in the amount of 3.3 billion hryvnias were not granted. These funds were supposed to go to hospitals, road construction, state investment projects of the Ministry of Health, decarbonization programs, etc. In fact, some of these projects did not even have time to move to the stage of real financing – they were strangled at the bureaucratic start.
At the same time, the public debt continues to grow. In the first quarter of 2025, the total amount of state and state-guaranteed debt rose by another 2% and reached 7.1 trillion hryvnias. Every sixth hryvnia of all budget revenues had to be spent on servicing and repaying the debt. But even here, the government did not have time to implement the plan in full — debt servicing costs turned out to be 15% lower than planned, that is, once again, technical problems in the implementation of budget procedures accompany even debt payments.
The absurdity is that the Ministry of Finance, as of the beginning of 2025, has not even approved the Debt Management Program for this year. That is, the country is servicing the record state debt in a manual mode, without a clearly established strategy and priorities, against the background of delaying the implementation of already financed domestic programs.
As we can see, the situation recorded by the Accounting Chamber is a systemic administrative inability to promptly launch projects even when the state has formally allocated resources for them. But let’s not forget about the most painful phenomenon of our country, namely bureaucracy. Many programs do not work because their budgets have not been approved. 74% of orders for the use of funds and 28% of program passports are still waiting for signatures. As a result, we have billions that never went to hospitals, roads, investment projects and other important areas.
Ukraine against the background of others: how wartime budget policy works where they learned from mistakes
It is impossible to analyze the current state of Ukrainian public finances without looking beyond the horizon and turning to the examples of other countries that have already gone through war or large-scale crises.
In the 1990s, after the declaration of independence and the start of the war, Croatia found itself in conditions of occupation of part of the territory, massive destruction and hyperinflation. Already in 1994, the government introduced medium-term budget planning and introduced automatic control over receivables in order to avoid the “washout” of expenditures due to an undisciplined treasury. Thus, even at the height of hostilities, the budgetary system already had standardized control procedures, debt forecasting and expenditure verification, which Ukraine still cannot approve in the conditions of the third year of a full-scale war.
During wars and conflicts in Israel, the government always operates on the principle of “financial mobilization”, where the parliament passes a reduced budget aimed at critical needs, with built-in quick adjustment mechanisms. Immediately after the end of hostilities, the “budgetary return to peace” program is launched, with a priority on economic recovery, support of small businesses, and digital modernization of state services. In Ukraine, even in the third year of the war, we do not have an approved National Debt Management Program, and 74% of the procedures for the use of funds remain unsigned. In Israel, this would lead to an immediate government scandal. In our case, this is just an excuse for another briefing.
In the 1950s, during the Korean War, South Korea implemented a system of “budget survival,” in which quarterly spending reports were not simply submitted but scrutinized by independent auditors. Already in 1953, the first national post-war recovery program appeared with clear performance indicators, which were demanded by both international partners and the administration itself. Against this background, Ukraine, with billions for reconstruction, of which less than 2% has been spent, looks like a country that knows how to ask for money, but does not know how to use it.
These examples are real experience that Ukraine can and should take into account. All these countries found themselves in difficult conditions without institutions and money, with lost territories, but they made a choice in favor of strict budgetary discipline, digital control and transparency, not after the end of hostilities, but during the struggle. Probably, this is precisely the key contrast: while in other countries the war became a catalyst for reforms, in Ukraine it still often serves as an excuse for administrative chaos.
It should be understood that this report of the Accounting Chamber did not just present us with a set of numbers, but became a kind of mirror of how the state copes with challenges. As you can see, unfortunately, the picture is not very attractive. We have a budget that relies on external loans and the army, we have a government that does not keep up, does not approve, does not control, and risks that are not just “on the horizon” but have settled right in the center of financial policy. The Accounting Chamber’s analysis of the implementation of the State Budget of Ukraine in the first quarter of 2025 revealed a number of systemic problems that require not only urgent solutions, but also a strategic rethinking of approaches to the formation, implementation and control of budget policy in the conditions of a war economy.
Today, Ukraine is faced with a choice: either to put financial and budgetary management in order, making it a real instrument of stability and development, or to continue patching holes with foreign loans, watching as economic indicators fall, and with them, trust in state efficiency.
