Ukraine Budget-2026: An In-Depth Analysis of Constructive Aspects and Potential Drawbacks
The Ukrainian Parliament is preparing for the second reading of the 2026 budget draft, which has sparked numerous discussions surrounding its key components and future implications.
The main focus of this document emphasizes prioritizing military and defense spending, directly linked to the urgent necessity of maintaining national security amid ongoing hostilities.
At the same time, the draft proposes launching new social, medical, and educational programs, while simultaneously reducing real expenditures on social protection of the population.
A significant concern is the planned unjustified increase in government administrative costs and debt servicing, which could negatively impact fiscal stability.
Moreover, the reduction of the investment component in the budget and the introduction of new public investment management methods are likely to hinder economic growth, especially during wartime conditions.
Forecasts project total revenue of the consolidated budget to reach 3.5 trillion UAH in 2026, representing 34% of GDP, indicating a decline compared to previous years.
A pressing issue is the substantial decrease in foreign grants—from 88.7 billion UAH in 2025 to 43.2 billion UAH in 2026—and the decline in own revenues of budget institutions.
Despite these decreases, adjusted figures might still surpass levels observed in 2024 and 2025.
The budget deficit for 2026 is estimated at 18.4% of GDP, which is lower than previous years, largely due to external borrowing plans, with gross external loans at 20.6% of GDP.
External credits are expected to cover most of the deficit, but this strategy complicates long-term fiscal stability.
Total expenditures are projected at 58.3% of GDP—less than in 2025 and even 2024—yet most expenses are directed toward defense and security, accounting for over 57%.
It is anticipated that in 2026, defense spending will decrease to 26.2% of GDP, though ongoing military needs might prompt amendments to increase expenditures.
Social, healthcare, education, and internally displaced persons’ support programs are likely to maintain or slightly increase their share, reflecting a balance between military and social priorities.
However, the reduction in investment, particularly in capital expenditures, diminishes the country’s long-term economic potential, raising concerns about sustainable development.
Experts highlight that Ukraine’s public investment levels are significantly below global standards, which hampers recovery and modernization efforts.
Overall, the 2026 budget project raises critical questions related to expenditure optimization and resource efficiency under difficult wartime conditions.