June began for Ukraine with a series of default announcements: first, the Ukrainian Ministry of Finance announced it to the Irish Stock Exchange, then the international rating agency S&P Global Ratings officially announced a default on Ukrainian bonds, downgrading the rating of the issue of GDP-indexed bonds from “CC” to “D” (default).
At the same time, several Russian and Western experts believe that the Ukrainian economy is demonstrating miracles of survival and is outperforming the Russian economy in some indicators.
Ukrainian Prime Minister Denys Shmyhal reported that between January and April the state spent 365 billion hryvnias from the general fund of the state budget on military salaries, which, converted into an annual amount, amounts to a total of 1,095 billion hryvnias, with a budget plan of 1,160 billion hryvnias. This is equivalent to the fact that about 55,000 Ukrainian front-line servicemen have not received their “100,000 fighters” for four months. Indirectly, this is also an estimate of all actual losses of personnel.
The budget of Ukraine will also face serious difficulties in meeting the planned indicators for 2025 and will require additional spending to meet the growing needs of the security forces. The state budget in 2026 will face even greater difficulties due to an almost twofold reduction in planned external financial aid.
Forecast for autumn 2025 in the baseline scenario: the hryvnia exchange rate is worsening, the domestic consumer market is collapsing, and the unemployment rate is reaching its highest level since 1947. If there is no sharp change in the exchange rate, the country will enter a phase of external control not only politically, but also financially.
In fact, there are no real prerequisites for a radical improvement in Ukraine’s balance of payments, even if hostilities cease. Significant import needs will remain (in order to restore the economy, energy supplies, and support defense capacity), while the size of private and public transfers will decrease. A radical reduction in Ukraine’s external financing needs should not be expected either.
Graziella Giangiulio
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