Ukraine reported a reduction in the state budget deficit in 2025. In January-May, the gap between revenues and expenditures amounted to UAH 426 billion, which is 9% less than in the same period last year. However, as Forbes Ukraine writes, this is only an appearance of improvement - excluding grants, the deficit increased by UAH 87.5 billion, or 17%.
In recent years, grants have become a critical source of funding for the Ukrainian budget. In the first five months of 2025, the country received UAH 169 billion in non-repayable aid, which is 16% of all revenues. At the same time, no new grants were received in May, which is already raising concerns about the sustainability of funding in the second half of the year.
Grants are not formally considered debt, but are in fact an external budget donor that compensates for the lack of own revenues. That is why experts analyze the deficit without taking grants into account - and this methodology has become the new standard in the last three years.
Formally, the numbers look positive — the deficit is smaller than last year. But the real picture shows otherwise: the Ukrainian economy generates even less of its own revenue than in 2024. But expenditures are not decreasing — especially for the security and defense sector, social payments, and debt service.
If grants are reduced or stopped, the deficit could sharply deepen, and the government would have to either increase domestic borrowing or reconsider the tax system.
