Who will be saved by Zelensky’s “thousand”: what do economists say about the president’s idea?
28 October 2024 13:52
ANALYSIS
Starting 1 December, Ukrainians will receive a one-time payment of UAH 1,000. The support programme was announced by President Volodymyr Zelenskyy, who called it a step to help every family in Ukraine. The payment, which has already been dubbed “mother-in-law’s thousand”, will be received by all citizens – regardless of age or social status – through the ePidderzhka programme. As a result, a family of five can expect an additional UAH 5,000.
First Deputy Minister of Economy Oleksiy Sobolev explained that these funds will be credited to the National Cashback card, which can be opened through the Diia app. They can be used during the winter months to pay for Ukrainian goods, including utilities, railway tickets, medicines, cultural events, or transferred to support the Armed Forces.
President Zelenskyy added that the Cabinet of Ministers will soon publish the details of the programme, and payments will start on 1 December. However, experts have different views on the effect of the programme on the Ukrainian economy.
A positive signal for the economy
Economist Oleksandr Okhrimenko notes that the programme is mostly positive, although it involves a certain element of PR. According to him, such a payment can partially ease the financial burden on families and stimulate spending on utility bills or other needs.
“This is better than nothing. It would be good if such payments became regular, for example, monthly, which would add to the economic effect,” said Okhrimenko.
Criticism and doubts about funding
Economist Oleg Pendzin in an exclusive commentary for
Funding and limited resources. First, the expert notes, the sources of funding for this programme mostly come from international partners rather than domestic tax revenues. According to Pendzin, the use of foreign macro-financial assistance, such as we expect from the IMF, should be directed to the most necessary expenditure items, not to general payments for all citizens.
“In the world, social assistance is usually targeted, aimed at supporting the poor and vulnerable. Therefore, the distribution of the same amount to everyone, regardless of income, raises questions about the effectiveness of such an initiative,” explains Oleg Pendzin.
Technical obstacles and access to payments. Another critical aspect that Pendzin points out is the choice of the payment mechanism through the National Cashback card in the Diia mobile application. According to him, this approach may limit access to funds for certain categories of citizens, including the elderly.
“Most pensioners, especially in villages, do not have smartphones with Diia or virtual cards installed. This creates barriers for those who need support the most,” Pendzin said.
The importance of budget amendments and the need for taxation. The economist also draws attention to the need to adjust the state budget to implement such a programme. He emphasises that in order to legally allocate funds for mass payments , it is necessary to amend the budget for 2024, which will clearly provide for a new expenditure item. In addition, Pendzin notes that these payments, like any other income of citizens, are subject to taxation, which requires additional clarification.
“According to the current tax legislation, personal income tax and military duty must be withheld from this thousand, which complicates the implementation of the programme,” emphasises Oleg Pendzin.
In the expert’s opinion, the programme of mass payments in its current form looks more like a political decision aimed at increasing the popularity of the government among the population. However, the economist warns that such a step is not economically justified and may create an additional financial burden on the state.
“In times of war and budget instability, such expenditures should be justified by specific benefits for the most vulnerable segments of the population, and not targeted at everyone equally,” Penzin concludes.
What does the Verkhovna Rada say?
Ukrainian MP Oleksiy Honcharenko has criticised the new initiative to make massive payments of UAH 1,000 to each Ukrainian, calling it “incomprehensible and unjustified” In an exclusive commentary for
“At present, the state does not provide support to specific categories that really need it. For example, families with small children, pensioners, military personnel – they all have critical needs that should be met first. Instead, it is proposed to pay the same amount to everyone, including those with significant wealth – businessmen, prosecutors or even very wealthy citizens. It looks illogical,” Honcharenko stressed.
The MP also drew attention to the need for careful planning of such payments in the state budget.
“The budget for the next year has not yet been adopted, and clear financial resources are needed to implement this programme. If the government plans to make payments this year, it is necessary to immediately amend the budget,” explains Oleksiy Honcharenko.
According to the European Solidarity MP, the support should be targeted and aimed at vulnerable groups of the population, and not look like a “personal gesture from a politician”.
“This is absolutely not in line with European practices. To be honest, I don’t know any European countries where this kind of thing would happen,” concludes Oleksiy Honcharenko.
Author: Anastasia Fedor
