The Rada is forecasting steep spending cuts: August widened the state budget deficit to 33 billion hryvnias
2 September 07:57
Ukraine will soon have to sharply cut budget expenditures due to tax shortfalls, problems with domestic excise taxes, and the potential loss of international financial aid. This was reported by Roksolana Pidlasa, chair of the Verkhovna Rada’s Budget Committee, in a Facebook post, according to "Komersant Ukrainian".
In the first eight months of 2026, the general fund of the state budget fell short of its planned revenue by 33.1 billion hryvnia. Nearly half of the total shortfall occurred in August alone. If August’s 15.6 billion hryvnias are subtracted from the total shortfall of 33.1 billion hryvnias, the shortfall relative to the plan as of the end of July amounted to approximately 17.5 billion hryvnias.
Thus, the budget shortfall increased by nearly 89% in August:
- the shortfall for January–July was about 17.5 billion hryvnias;
- shortfall for August alone—15.6 billion UAH;
- the total shortfall for the eight months was 33.1 billion UAH.
Which taxes generated the most revenue
The main sources of revenue for the General Fund from January through August were:
- import VAT—433.8 billion UAH,
- corporate income tax—265.7 billion UAH,
- personal income tax and the military levy—245.9 billion UAH (since July 2026, the military levy has been credited to a special fund and earmarked for the financial support of the Armed Forces of Ukraine),
- VAT on goods produced in Ukraine—218.3 billion UAH (already net of refunded VAT),
- funds from the National Bank of Ukraine — 146.1 billion UAH,
- import excise tax—119 billion UAH,
- domestic excise tax—88.1 billion UAH,
- dividends and a portion of the net profit (income) of business entities—56.2 billion UAH,
- import duties—42.5 billion UAH,
- rent payments—38.9 billion UAH.
In these statistics, personal income tax and the military levy are combined for the corresponding period. However, starting July 1, 2026, the military levy will no longer be credited to the general fund but to a special fund.
In accordance with Law No. 4908-IX, these funds are to be used exclusively for the pay of Ukrainian Armed Forces personnel.
Which revenue categories exceeded the target
Some taxes generated more revenue than budgeted.
The largest surpluses came from:
- corporate income tax—an increase of 29.2 billion UAH, or 12.4%;
- personal income tax and the military levy—an additional 8 billion UAH, or 3.4%;
- excise tax on imported goods — up 2.1 billion UAH, or 1.8%;
- resource rent — up by 1.3 billion UAH, or 3.4%.
The total surplus across these four categories amounts to over 40 billion UAH. This partially offset significantly larger shortfalls in other budget items.
That is why the overall budget shortfall stands at 33.1 billion UAH, even though the total of the main unmet targets is close to 84 billion UAH.
Which taxes fell short of the target
The budget fell short the most on value-added tax.
Shortfalls by major sources:
- VAT on goods produced in Ukraine — 35.6 billion UAH, or 14%;
- import VAT — 23.8 billion UAH, or 5.2%;
- domestic excise tax — 12.1 billion UAH, or 12%;
- dividends and a portion of business profits — 11.6 billion UAH, or 17.1%;
- import duties — approximately 574 million UAH, or 1.3%.
Collectively, these five revenue streams fell short of projections by approximately 83.7 billion UAH.
The biggest problem is VAT. Combined, domestic and import value-added tax fell short of projected revenue by approximately 59.4 billion hryvnia.
How the Budget Was Spent in 2026
Defense remains the largest area of spending. According to the chair of the Budget Committee, approximately 1.8 trillion UAH has been allocated to defense since the beginning of the year—62% of general fund expenditures.
Other major areas include:
- repayment of domestic and foreign debt—377.3 billion UAH;
- social protection and support for veterans—306.8 billion hryvnia;
- public debt servicing—249.4 billion UAH;
- the medical guarantees program and health screenings—127.6 billion hryvnia;
- education subsidies and additional payments to teachers — 102.3 billion UAH;
- basic and additional subsidies to local budgets — 43.6 billion UAH.
How Much Ukraine Received from Partners and Government Bonds
According to Pidlasa, approximately $20 billion in international aid was used for general fund expenditures in January–August.
An additional 317 billion UAH was raised to finance the general fund through domestic government bonds. In August, the net increase in funding from domestic government bonds amounted to only about 18 billion UAH.
Domestic government bonds are not tax revenues but government borrowings that Ukraine must repay and on which it pays interest.
Domestic bonds remain one of the main sources of funding for defense needs, as international partners primarily direct budget aid toward civilian expenditures.
Why International Funding Is at Risk
The situation was complicated by a vote in the Verkhovna Rada on September 1. Parliament did not support a number of bills related to external financing programs.
President Volodymyr Zelenskyy stated that three of the bills could have unlocked more than $4 billion in international support for Ukraine, while two others were part of the cooperation program with the IMF.
One of the most controversial bills was the one on taxing international packages worth up to €150. It received only 194 votes, falling short of the required 226.
According to Pidlasa’s assessment, the following are at risk:
- approximately $4.26 billion in macro-financial support;
- approximately $1.66 billion in funding under the IMF program.
“Against this backdrop, Parliament today failed to pass the laws—the conditions for the EU’s macro-financial assistance tranche (total amount: $4.26 billion) and the IMF’s tranche (total amount: $1.66 billion). Under these circumstances, we can expect severe budget spending cuts in the very near future,” Pidlasa emphasized.
At the same time, the “failed vote” does not necessarily mean the permanent loss of the entire amount. The Verkhovna Rada may revisit the documents, and the deadlines for fulfilling certain conditions may be revised or clarified in negotiations with partners.
