Ukraine’s 2026 budget: social spending up, election calculations in play

UKRAINE - In Brief 17 Sep 2025 by Dmytro Boyarchuk

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The Cabinet submitted the draft 2026 spending plan to parliament on September 15th, in accordance with the Budget Code. Central budget revenues are projected at UAH 2.9 trillion (29.1% of GDP), up by UAH 407.5 billion ($9.8 billion) from the current target. State expenditures are set at UAH 4.8 trillion (47.8% of GDP), an increase of UAH 414.4 billion ($10.0 billion) compared to the 2025 target. The deficit target remains unchanged in nominal terms at UAH 1.9 trillion, although it is lower as a percentage of GDP (19.1% in 2026 versus 21.2% targeted for 2025). The main contributors to the revenue increase are VAT (+UAH 165.2 billion), personal income tax (+UAH 93.6 billion), NBU profits (+UAH 61.8 billion), and excise duties (+UAH 33.4 billion), which together account for nearly all of the targeted budget revenue growth. There are also some minor tax measures, such as the taxation of online retail operations, but their impact is negligible. So far, the Ministry of Finance is not prepared to implement a substantial tax increase. On the spending side, there is a clear shift toward social programs, education, and healthcare. Defense outlays remain high, but the change in priorities is evident: allocations for defense and internal affairs are projected to stay almost flat from 2025 onward. The Finance Ministry has set aside UAH 200 billion ($4.8 billion) for security needs. Why? Most likely because of uncertainty over deficit financing, the reserves were created in case additional funding becomes available. The deficit (UAH 1.9 trillion, or 19.1% of GDP) is expected to be financed mainly through external borrowings and grants. However, of the $45.5 billion in external fundi...