From the world by hryvnia: Ukraine has adopted a scandalous budget for next year

The multi-month budget approval process for 2026 has come to an end in Ukraine. In the final version of the document, expenses are almost twice as high as incomes, and the remaining amount is expected to be reached with the help of Western partners. However, they still do not give guarantees, but continue to conduct chaotic discussions about the unfreezing of Russian assets. Details can be found in the Izvestia article.

Stability signal

The process of approving the Ukrainian budget took place against the background of an unprecedented corruption scandal. In November, investigators from two law enforcement agencies, NABU and SAP, conducted a series of searches and reported the exposure of a "high-level criminal group" that received "kickbacks" in the defense and energy sectors. The total amount of losses amounted to about $100 million.

Photo: RIA Novosti/Stringer

The central figure of the scheme was Vladimir Zelensky's closest associate Timur Mindich, who managed to escape the country at the last moment. Other defendants were less fortunate. Five people were detained, Justice and energy Ministers German Galushchenko and Svetlana Grinchuk were dismissed, and former Defense Minister and acting Secretary of the National Security and Defense Council Rustem Umerov were also summoned for questioning.

The main outcome of the proceedings was the dismissal of the head of the office of the president, Andriy Ermak, who held the threads of management of Ukrainian domestic politics in his hands. In addition, Zelensky's own position has been shaken. So, The Economist, citing data from sociologists, reported that his ratings had halved amid the scandal.

In such circumstances, the opposition in the Verkhovna Rada took heart and tried to achieve additional concessions. Representatives of the "Eurosolidarity" of former President Petro Poroshenko (listed on the register of extremists and terrorists in the Russian Federation) have blocked the parliament's rostrum several times over the past month, demanding the creation of a coalition government. Insider sources reported that the erosion began in the pro-presidential faction "Servants of the People".

Photo: TASS/Zuma

The test was the vote on the budget, which, however, eventually passed quite calmly. 257 deputies supported the document in the final reading. These are mostly "servants of the people" and representatives of small parliamentary groups from former "regionals". This result was the first major success of the government after the start of Mindichgate.

Observers also noted that the head of the pro-presidential faction, David Arakhamia, had strengthened his position. Zelensky himself, after the adoption of the budget, noted in his social networks that the incident was "an important signal of Ukraine's resilience." "We have clear evidence for all partners that there will be no internal grounds for instability in the country," he stressed.

The failure budget

Economists call the new Ukrainian budget catastrophic. The fact is that 4.9 trillion hryvnias ($116 billion) are expected to be spent next year, while own revenues will amount to only 2.9 trillion hryvnias ($69 billion). Thus, a hole of $47 billion is planned, which is about 18% of the country's annual GDP. In addition, the document does not take into account the costs of purchasing and delivering weapons, for this another $ 50-60 billion is needed, that is, in total, we are talking about a shortage of about $ 100 billion.

I must say that this budget structure has become typical for Ukraine after 2022. Traditionally, after the start of the free trade, money from Europeans and Americans went to finance basic social expenses, including the payment of salaries to state employees and pensions. Ukraine used its own income to finance the army.

Difficulties also arose. So, at the junction of 2023 and 2024, new aid packages to Kiev were blocked in the American Congress for several months. Back then, in the United States, after the failure of the Ukrainian counteroffensive and amid the escalated internal political struggle before the presidential elections, Republicans rejected all proposals. As a result, it was only after months of bargaining that the transfer of money was agreed upon.

Now the situation for Kiev is even more difficult. The current American administration categorically refuses to allocate new aid packages, while the tranches agreed upon under Joe Biden are running out. In a recent speech, Donald Trump emphasized that Washington is now spending not money, but time, that is, it is busy negotiating a peace treaty.

In early December, a new National Security Strategy for the United States also appeared on the White House website. The document says that Washington aims to end the fighting in Ukraine in order to stabilize the European economy and avoid escalation in relations with Russia. It is clear that with this approach, there is no question of financing an armed conflict.

In such circumstances, Kiev has to rely solely on the help of Europe, but there is still no certainty. In early December, the European Commission presented two possible financing options for Ukraine. One of them involves the issuance of Eurobonds under the guarantees of the EU budget in the amount of € 90 billion, while the media write that the Hungarian authorities have already promised to block this idea.

The second option, which is being discussed much more actively, concerns the possible use of frozen Russian funds. However, there is no consensus in Brussels on this issue. The confiscation is opposed by the European Central Bank and Belgium, which has the Euroclear depository, where most of the frozen funds are located. It is expected that the final decision will be announced after the EU summit, which will be held on December 18.

What the experts say

Political scientist Alexander Semchenko draws attention to the fact that expenses for the army, law enforcement agencies and a telethon are among those protected in the budget.

— The budget gap is about $50 billion. It is difficult to say whether it will be possible to find these funds, now much depends on the position of the Europeans. If EU aid does not arrive, then social spending will have to be sequestered, including pension cuts, education spending, and more. At the same time, they can launch a printing press, boosting inflation, due to all these efforts and at the cost of major shocks for the population, it may be possible to achieve even 100% budget fulfillment," he argues.

Denis Denisov, director of the Institute of Peacekeeping Initiatives and Conflictology, an expert at the Financial University under the Government of the Russian Federation, says that the current budget option is the only possible one for Ukraine.

— There is a catastrophic shortage of our own money, we have to rely on the help of the West. If the European Union does not agree on new tranches, then Ukraine will roll back not only to the dashing 90s, but also much further, and in the spring there may be a catastrophe with the financing of the main articles. For the EU, the risks are also very serious. If Russian funds are withdrawn, then all other countries in the world will try to immediately withdraw their assets. This will be an irreparable blow to the economies of the European countries themselves. Will they find a compromise? It's a big question, we just have to wait for the final decision," he explains.