In Ukraine, the process of developing the budget for 2024 is coming to an end. The Ministry of Finance has already determined what macroeconomic indicators will be, as well as social standards for the next year. The main problem is a deep deficit, which can only be covered through international support, and there are currently no guarantees of such support.
What will the budget be like: GDP, inflation and salaries
34.5 million people live in Ukraine, the Ministry of Finance notes. It is almost impossible to calculate a budget without understanding the population size. Based on the population size, one can calculate expenses for the social sphere, medicine, education, the load on infrastructure, the amount of taxes received, etc. However, it is extremely difficult to obtain accurate figures before the end of a full-scale war. To do this, it is necessary to conduct a population census. Within three years, GDP growth of 5-7.5% is expected.
So, next year, as the department expects, gross domestic product will increase by 5%, in 2025 – by 7%, in 2026 – by another 7.5%. This will not allow us to get closer to the level of GDP that was in 2021, before the start of a full-scale war.
How prices will rise:
- inflation in 2024 – 10.8%;
- in 2025 – 7%;
- in 2026 – 5.8%.
Salaries will also increase. On average, next year’s salary, according to calculations by the Ministry of Finance, will be UAH 21,852, in 2025 – UAH 25,645, in 2026 – UAH 29,625. The minimum wage will also increase. Next year it will be increased in January from 6,700 to 7,100 UAH and in July to 8,000 UAH. In 2025, the minimum wage will be UAH 8,370, and in 2026 – UAH 8,956. The cost of living will also be reviewed. And alimony, pensions, a number of payments, subsidies, etc. are tied to it. For example, the minimum pension will increase:
- in 2024 from 2093 to 2361 UAH;
- in 2025 – up to 2573 UAH;
- in 2026 – up to 2774 UAH.
Lyudmila Cherenko, economist, expert on social economics and senior researcher at the Institute of Demography and Social Research at the National Academy of Sciences of Ukraine, says: judging by the document, for the first half of 2024 the government actually plans to freeze the situation that exists now. However, earnings are expected to rise significantly next July.
“Now the process of developing the state budget is coming to an end, and it is obvious that for the first half of 2024 they plan to retranslate the situation that exists now,” she explained.
What will happen to social benefits?
Pensions. Along with the increase in the minimum pension due to the increase in the cost of living, the guaranteed payment will also increase for those Ukrainian pensioners who have fulfilled the length of service requirements and reached their 65th birthday. By law they must receive at least:
- 2680 UAH – in 2023;
- 2840 UAH – from January to July 2024;
- 3200 UAH – from July 2024 to January 2025;
- 3348 UAH – in 2025;
- 3582 UAH – in 2026.
Alimony. The minimum amount of alimony in Ukraine must be no less than the subsistence level for a child of the appropriate age. The Ministry of Finance plans to increase the cost of living for three years in advance. As a result, the amount of alimony will change.
For children under 6 years of age:
- in 2024 – 2563 UAH;
- in 2025 – 2794 UAH;
- in 2026 – 3012 UAH.
For children aged 6 to 18 years:
- in 2024 – 3196 UAH;
- in 2025 – 3484 UAH;
- in 2026 – 3756 UAH.
Taxes. In Ukraine, taxes for individual entrepreneurs (“FOPs”) primarily depend on the size of social standards. So, as a result of increasing the minimum wage, the single social contribution will change as follows:
- 1562 UAH – from January to July 2024;
- 1760 UAH – from July 2024 to January 2025;
- 1841 UAH – in 2025;
- 1970 UAH – in 2026.
The tax for individual entrepreneurs, who are in the first tax group, depends on the subsistence level for a working person. This is 10% of the cost of living. So, the tax amount will be:
- in 2024 – 302.8 UAH;
- in 2025 – 330.1 UAH;
- in 2026 – 355.8 UAH.
Disputes surrounding military personal income tax
When developing the draft budget for 2024, the Ministry of Finance faced a shortage of funds. There is critically not enough money to finance all expenses in a full-scale war. By law, the armed forces can only be provided with taxpayer funds (the use of international loans and grants is prohibited).
The Ministry of Finance has several ideas. For example, they can receive additional tens of billions of hryvnia if they withdraw from local budgets personal income taxes (NDFL), which they receive from the military. Local authorities also spend the taxes they receive on the military, Andrey “Khokhol” Sergan, commander of a UAV platoon in the 59th separate motorized infantry brigade named after Yakov Handzyuk of the Ukrainian Armed Forces, tells OBOZREVATEL. According to him, it is not difficult for the brigade commander to come to an agreement with the local authorities. And if the local government does not want to help the Armed Forces, then you can change the point of permanent deployment, then another territorial community will receive taxes.
The Ministry of Finance wants to receive these funds in order to centrally finance the Armed Forces of Ukraine and reduce the budget deficit. Another option is to devalue the hryvnia to a level of about 41 UAH per dollar. This would allow us to increase the assistance received from international partners in hryvnia equivalent and increase the amount of customs revenues (paid in foreign currency). The National Bank does not like this idea. They aim to gradually reduce inflation and try to keep the dollar in a relatively stable range.
Budget of a warring country
Sergei Marchenko already stated during the telethon that it is now extremely difficult to predict the budget for 2024. There are no guarantees from international partners (as was the case last year), while our own tax revenues are not even enough to fully provide for the military.
In this situation, it is critically important that Ukrainians pay taxes regularly and the economy develops. UAH 1.6 trillion must be found for defense and security this year, and the budget for next year will not be less. And although the military needs to increase its budget, it is difficult to pay even the amount that is available now.
Ukraine faces a difficult period of recovery even after the end of the war. Until this moment, public sector salaries, part of social expenses, and infrastructure projects are financed through international assistance. Our own resources are barely enough to meet the needs of the army.
