Govt approves draft state budget-2025 with deficit reduction to 19.4% of GDP

The government of Ukraine on Friday approved the draft state budget for 2025 with revenues (excluding official transfers and grants) of the general fund at the level of UAH 2.007 trillion and general fund expenditures of UAH 3.644 trillion, the Finance Ministry said on its website.

"The forecast for financing the state budget for 2025 provides for a reduction in the state budget deficit to 19.4% of GDP (in the current law on the state budget for 2024 – 20.6%), which corresponds to the indicators agreed upon with international partners," the press release said.

According to it, with a projected deficit of UAH 1.641 trillion, government borrowing from the general fund is planned in the amount of UAH 2.238 trillion, including internal borrowing of UAH 579.2 billion and external borrowing of UAH 1.658 trillion.

"Not all of the external borrowing has been confirmed by international partners yet, which requires further diligence and persistence," the Finance Ministry said.

The agency specified that external financing is envisaged in the amount of $38.4 billion, privatization – UAH 3.2 billion, debt servicing UAH 480.8 billion.

In the draft amendments to the state budget for 2024 on increasing general fund expenditures by UAH 434.6 billion, which the Verkhovna Rada adopted in early September, general fund revenues are envisaged in the amount of UAH 1.811 trillion, expenditures – UAH 3.547 trillion, deficit – UAH 1.846 trillion, government borrowing – UAH 2.348 trillion, including domestic – UAH 742 billion, and total external financing – $41.3 billion.

In the Budget Declaration for 2025-2027, approved at the end of June, general fund revenues for 2025 were expected to be UAH 2.193 trillion, expenditures – UAH 3.956 trillion. At the same time, it is expected that GDP growth will slow down from 3.5% this year to 2.7%, with inflation accelerating from 7.9% to 9.5% and the average annual exchange rate rising from UAH 40.8 to UAH 45/$1.

The Ministry of Finance noted that the draft state budget for 2025 assumes an increase in public debt from UAH 7.68 trillion to UAH 8.21 trillion, but in relation to GDP it will decrease from 100.5% of GDP to 97% of GDP.

The agency emphasized that funding for the security and defense sector is a key priority set out in the draft budget: financial resources for the security and defense sector in 2025 will increase from UAH 2.177 trillion in the draft amendments to the 2024 state budget to UAH 2.223 trillion, as envisaged in the Budget Declaration, or 26.3% of the country's projected GDP, and Ukraine's defense will be ensured.

"Expenses to ensure effective resistance to the enemy will grow. All domestic receipts and borrowings will be directed to the needs of Ukraine's defenders. Assistance to citizens, support for veterans, and social services are also the government's focus for the next year," Finance Minister Serhiy Marchenko commented on the draft document during a government meeting.

The envisaged expenses include monetary, material, and food supplies for the military, the acquisition of weapons, military equipment, and support for the defense industry, the ministry specified.

According to the release, UAH 43.9 billion has been allocated in the reserve fund for a prompt response to unforeseen events.

Social standards, including the minimum wage and subsistence, remain at the level of December 2024. The budget also provides for a new model for managing public investment projects with a distribution plan of UAH 25 billion for 2025.

It is noted that assistance to war veterans – funding for support programs has been maintained at the level of the current year, taking into account the distribution of investment projects.

"Funds for IDPs, persons with disabilities, benefits and subsidies, Pension Fund transfers for pension payments will be taken into account in full. In addition, pensions will be indexed in 2025 (from March 1, 2025)," the ministry added.

According to its data, UAH 419.2 billion has been allocated to support socially vulnerable citizens, of which UAH 237.9 billion is directed to the Pension Fund for pension payments, UAH 127.9 billion to help low-income families and individuals in difficult life circumstances, and UAH 42.3 billion to pay benefits and subsidies, the release says.

It is noted that healthcare costs will amount to UAH 210.7 billion, including funding for the program of medical guarantees and providing hospitals with medicines and medical products for the treatment of serious diseases. Priorities, in particular, include the creation of a single medical space and providing housing for medical workers in rural areas.

According to the release, UAH 169.3 billion is planned for education, which includes the payment of teachers' salaries, grants for higher education, provision of textbooks and healthy nutrition for students. Also, UAH 9.6 billion is provided for the development of culture and the information space, UAH 4 billion for digital transformation, in particular, for financing innovative projects to meet the needs of the security and defense sector (BRAVE 1), UAH 14 billion for supporting scientific research, in particular, in the field of the defense industry, energy and energy efficiency.

As part of business support, financing is provided for the Entrepreneurship Development Fund in the amount of UAH 18 billion to provide preferential loans under the Affordable Loans 5-7-9% program, and UAH 1.4 billion will be allocated for grants for business, the ministry indicated.

According to it, UAH 12.2 billion is provided to support the regions in the form of a subvention to compensate for the difference in tariffs, which will allow local budgets to ensure the availability of utilities for the population. In addition, UAH 9.4 billion will be directed to providing housing to citizens through the Ukrfinzhytlo program.

It is indicated that UAH 1 billion is allocated for humanitarian demining of lands, which will ensure security in the territories affected by military actions. Some UAH 1.75 billion is also allocated for the State Fund for Decarbonization and Energy Efficient Transformation, aimed at reducing carbon emissions and increasing the energy efficiency of the economy.

In addition, the Ministry of Finance noted, the project contains an additional subsidy to local budgets in the amount of UAH 51.2 billion, which is UAH 17 billion more than in 2024. These funds will be directed, in particular, to the implementation of the powers of local governments in the de-occupied territories, which will contribute to the restoration of economic activity and an increase in the standard of living of the population in the regions affected by the war.

It is emphasized that the draft state budget for 2025 was prepared on time and is balanced.

According to the Budget Code, the draft state budget must be submitted to the Verkhovna Rada by September 15 inclusive.