Analysis of the implementation of the State Budget-2025 in the first quarter - auditors' conclusions

11 June 2024

Based on the results of the analysis of the implementation of the Law on the State Budget of Ukraine for 2025 in the first quarter, the Accounting Chamber identified risks that may negatively affect economic indicators. Among them: a decrease in the revenue part of local budgets and social insurance funds due to a decrease in the number of registered individual entrepreneurs, currency and financial instability, and increased inflationary pressure.

The Head of the Accounting Chamber, Olga Pishchanska, presenting the Conclusion on the results of the aforementioned analysis during the meeting on June 10, noted that the implementation of the state budget in the first quarter of 2025, as in previous periods, was complicated by circumstances caused by the war: limited logistical capabilities, population migration, destroyed energy and other infrastructure.

In addition, in January - March real GDP was only 0.5% with a projected growth for 2025 - 2.7%. This creates a risk of not receiving the planned revenues for this year. One of the main factors that restrained GDP growth was a reduction in exports by 8.7%. First of all, exports of food products and raw materials for their production and iron ore decreased due to last year's low grain harvests and lower world prices for iron ore.

At the same time, the presence of Ukrainian chemical industry products, wood and wood products, mechanical engineering, and other industrial products with high added value on foreign markets increased. Currently, the share of such products in exports has increased to 15.2%.

STATE BUDGET REVENUE

Loans and grants received from international partners contributed to maintaining financial stability and filling the state budget. In the total volume of external revenues, their share increased from 9% to 27%, although this is 23% less than the plan for January - March 2025. In particular, UAH 19.4 billion of planned EU assistance under the Ukraine Facility program was not received in the reporting period (these funds were received in April).

State budget revenues This is primarily due to a 2.2-fold increase (up to UAH 292.5 billion) in the volumes of own revenues of budgetary institutions, in particular those under the jurisdiction of the Ministry of Defense of Ukraine. The institutions' own revenues accounted for almost a third of budget revenues, while the share of tax revenues decreased by 10 percentage points.

The reduction in the debt of taxpayers to the state budget since the beginning of the year by 12% occurred as a result of its removal from accounting due to court appeals and the cancellation of decisions of the State Tax Service regarding its assessment. Previously, the Accounting Chamber emphasized the need to improve the quality of the control and inspection activities of the State Tax Service of Ukraine in the report on the results of the audit on appealing against decisions of the State Tax Service.

STATE BUDGET EXPENDITURE

State budget expenditures in the first quarter of 2025 – amounted to 1.2 trillion UAH – this is 38.5% more compared to the same period in 2024.

The growth is primarily due to an increase in expenditures on defense and state security – up to 73.5% of the total.

«The largest expenditures of the Ministry of Defense – for the purchase, modernization and repair of weapons, military equipment, means and equipment. At the same time, significant amounts of expenditures were redistributed for the purchase of defense goods from those planned for labor remuneration in October – December 2025 (174.8 billion UAH),– emphasized Olga Pishchanska.

In the first quarter of this year, overdue receivables continued to grow (by 23.6% since the beginning of the year),almost 90% of which relate to contracts of the Ministry of Defense. The main reasons are the failure of suppliers to fulfill the terms of contracts (agreements) regarding the delivery dates of defense products (provision of services and performance of work).

The largest state budget expenditures:

– UAH 366 billion for the purchase of goods and services (of which UAH 287.4 billion – for military equipment);

– UAH 353.5 billion for wages with accruals (of which UAH 269.1 billion for cash support for military personnel);

– UAH 159.9 billion for social payments and assistance to the population;

– UAH 131.9 billion for subsidies and current transfers to enterprises (of which UAH 111.8 billion – for the purchase, modernization and repair of weapons, military equipment, means and equipment).

The report also highlights cases of extremely low levels of use of funds allocated for certain areas of importance to the state. Thus, the Government allocated UAH 5.2 billion (68.4%) from the remaining funds of the Fund for the Elimination of the Consequences of Armed Aggression to complete previously initiated projects, however, by the end of the first quarter, only UAH 100 million had been used.

At the same time, state budget expenditures for the provision of subventions for the implementation of public investment projects through loans attracted by the state to the special fund turned out to be 96.4% less than planned.

The Accounting Chamber draws special attention to the failure of the Government and the main administrators of funds to comply with the requirements of the Budget Code of Ukraine. Thus, 73.8% of procedures for the use of funds and 28% of passports of budget programs were not approved on time. This led to the failure to implement the projects planned for January – March of expenditures and non-provision of loans in the amount of 3.3 billion hryvnias. The specified funds were to be directed to financing the Ministry of Health program for the construction and equipping of hospitals, the road infrastructure development program, the implementation of public investment projects of the Ministry of Health, decarbonization programs, etc.

STATE AND STATE-GUARANTEED DEBT

In its Opinion, the Accounting Chamber emphasizes that The Ministry of Finance of Ukraine has not approved the Debt Management Program for 2025.

At the same time, in the first quarter of 2025, the total amount of state and state-guaranteed debt increased by 2% - to 7.1 trillion hryvnias. Every sixth hryvnia of state budget revenues was spent on its repayment and servicing. At the same time, these expenses are 15% less than planned.

«I note that the risks we identified occur due to the fact that the recommendations of the Accounting Chamber, provided based on the results of the analysis of the state budget in previous periods, were not implemented in a timely and full manner», – noted Olga Pishchanska.

RECOMMENDATIONS

Based on the results of the analysis, the Accounting Chamber provided the Government with a number of recommendations to eliminate the identified deviations and violations in the implementation of the Law of Ukraine «On the State Budget of Ukraine for 2025», in particular, it recommends instructing:

– The Ministry of Finance, when developing draft laws on amendments to the law on the state budget for 2025, should consider the possibility of changing the volume of revenues taking into account their actual receipts from the beginning of the year;

– responsible bodies should ensure the development and approval, in agreement with the Ministry of Finance, of passports of budget programs and the implementation of budget programs;

– the main spending units should prevent the increase in budget debt and take measures to repay overdue debt;

– The Ministry of Finance shall approve and publish the debt management program for 2025 and ensure compliance with the deadline for publishing the report on its implementation, etc.

This Opinion will be sent to the Committee of the Verkhovna Rada of Ukraine on Budget, the Ministry of Finance of Ukraine and the Apparatus of the Verkhovna Rada of Ukraine, and also published on the official website of the Accounting Chamber.