Ukrainian parliament, Rada, reveals amount of budget loss due to hidden schemes
Ukraine's annual budget is estimated to be shortchanged by 800-900 billion hryvnias ($19.2 - 21.6 billion), according to Daniel Getmantsev, a member of the Verkhovna Rada responsible for financial, tax, and customs policy. This revelation comes from a report by the Ukrainian version of Forbes. The economist argued that around 30-50% of Ukraine's economy operates in the shadows, with some sectors exceeding 60%.
Getmantsev elaborated that moving budget expenditure out of the shadow sector could assist in addressing Ukraine's budget deficit and finance the military's needs. Previously, news reports stated that Ukraine would miss a $665 million payment on growth-linked debt after failing to reach an agreement on its restructuring with creditors.
Ukraine had agreed with investors in 2024 to remove the cross-default clause between so-called GDP warrants and its regular international bonds, protecting it from a scenario where a default on one instrument would impact other debts. Earlier, a former Ukrainian Prime Minister had expressed concerns about the country’s potential bankruptcy.
In their efforts to combat shadow schemes, the government is emphasizing anti-corruption reforms, business integrity measures, and strengthening regulatory frameworks. This includes making anti-corruption compliance programs mandatory for companies, criminalizing legal entities for corruption offenses, and improving whistleblower protections. The focus is also on effective implementation, fostering trust, and enforcement to hold legal entities responsible for corruption.
International financial support is crucial in maintaining financial stability despite economic pressures and shadow economy risks. However, these efforts face challenges, particularly concerning the expansion of criminal networks in the post-conflict environment, which could undermine economic gains and increase shadow economy activities.
Securing Ukraine’s budget revenue involves reducing tax evasion and corrupt leakage, thereby enhancing state financial resources and increasing investor confidence, leading to international financial aid and investments necessary for Ukraine’s economic growth and budget health. If effectively implemented, these measures could support continued GDP growth projected at 2.5% in 2025 and 2.0% in 2026, helping to stabilize Ukraine's economy under challenging conditions.
- The budget deficit in Ukraine and the military's financial needs might be alleviated by transitioning a significant portion of the budget expenditure out of the informal sector, as suggested by Daniel Getmantsev.
- Shadow economy activities in Ukraine pose a threat to the country's financial stability, and international financial support remains essential for combating these risks.
- The government's anti-corruption reforms, such as making anti-corruption programs mandatory for companies and improving whistleblower protections, are designed to decrease tax evasion and increase investor confidence in Ukraine's business and finance industries.
