Money for army, increasing pensions and salaries: Main priorities of 2024 budget

When the budget for 2024 will be released

According to legal requirements, the document must be submitted to the Ukrainian parliament by September 15.

"It is already in the final stages of development," said Prime Minister Denys Shmyhal just a week ago.

Following registration, it must be presented in a parliamentary session. Depending on the discussions, the document may be rejected. In such a case, the Cabinet of Ministers is obliged to submit a revised project with an explanation of the proposed changes within seven days.

If the document is accepted for consideration, preparations for the first reading begin. During this time, the relevant budget committee of the parliament accepts proposals. Amendments and additions can be proposed by all legislative initiative entities, from the president to the National Bank. In addition, the Accounting Chamber is expected to conduct an expert examination of the project by October 1.

After the conclusions of the relevant committee, the first reading should take place by October 20. Approved budget conclusions should be considered by the Cabinet of Ministers in preparation for the second reading.

During the second reading, the overall deficit, maximum national debt, total revenue and expenditure amounts, minimum wage, subsistence minimum, and other indicators are approved. Other parts of the project that were not accepted during the second reading are moved to the third.

The law on the state budget for 2024 must be adopted by December 1.

Three priorities

Prime Minister Shmyhal emphasizes three priorities. The primary one remains security and defense. The second priority is social payments and salaries for doctors and teachers.

"We plan a two-stage increase in the minimum wage. We include pension indexing, subsidies, assistance to veterans, and other payments," he emphasized.

The third priority is recovery, including completing ongoing projects and launching new ones.

Defense budget will not be cut

President of Ukraine Volodymyr Zelenskyy, in one of his addresses, stated that defense and security remain a top priority. The defense budget will be at least the same as this year, which is 1.6 trillion hryvnias.

As per the Ministry of Finance, the 2024 project includes prioritized funding for this sector. It proposes directing the personal income tax (PIT) for military personnel to a special fund of the state budget for the development of the defense-industrial complex.

"For 2023, the projected amount will be over 96 billion hryvnias, while in 2021 it was approximately 12 billion hryvnias. The increase is happening because the state is increasing spending on the defense sector and military salaries," said Denys Shmyhal today.

Nearly +100 billion for drones and weapons

The 2024 budget includes additional funds to produce weapons and the production and purchase of drones.

"Plus, nearly 100 billion hryvnias targeted for the production of weapons, which is handled by the Ministry of Strategic Industries, and for the Ukrainian Army's drones, which are showing very good and prominent results," President Zelenskyy stated.

Today, Shmyhal clarified that 93.7 billion hryvnias would be allocated to these items.

What will happen to the dollar exchange rate?

As stated by Finance Minister Serhii Marchenko, the average annual exchange rate is expected to be 41.4 hryvnias per dollar. This forecast is part of the government's economic macro-forecast approved during the preparation of the 2024 budget.

However, this forecast does not impact the official exchange rates of the National Bank. It typically does not align with the real exchange rate. For instance, the 2023 budget projected an average rate of 42.2 hryvnias per dollar, while the official rate remains fixed at 36.6.

Social expenditures and pensions

At least 469 billion hryvnias will be allocated for social programs. Additional funds will be allocated to the healthcare system, with a minimum increase of +24 billion hryvnias compared to the 2023 budget. There will also be increased spending on education, particularly on teachers' and lecturers' salaries.

Regarding pensions, Ukrainians are promised a "significant indexation" scheduled for March, as stipulated by the relevant law. The amount will depend on the inflation rate and average wages, according to the Ministry of Social Policy.

Concerning veterans, the Ministry of Finance states that "new approaches have been identified for their comprehensive and high-quality support."

How much will the minimum wage increase

Regarding the increase in the minimum wage, which is currently at 6,700 hryvnias, it is not only being discussed in the government. According to President Zelenskyy, it will start to increase in the first half of 2024.

According to the Ministry of Finance's forecasts, the minimum wage may increase in two stages:

• From January 1, 2024, it may increase to 7,100 hryvnias.
• From July 1, 2024, it may increase to 8,000 hryvnias.

It's worth noting that the current level of 6,700 hryvnias has not changed since October 2022.

New salary system for officials

Starting in 2024, a new system of official salaries in government agencies will be introduced. The expenses for this are included in the budget project.

As Deputy Minister of Finance Roman Yermolychev stated, the new model involves strengthening the role of the official salary and reducing variable components such as bonuses. The minimum grade size will be linked to the minimum wage.

"This will increase the efficiency of civil servants and introduce transparent and fair conditions for remuneration," added the Deputy Minister.

It's worth noting that a "grade" is a grouping of positions based on certain factors that determine the permanent volume of labor remuneration.

Local budget resources will be larger than in 2021

Prime Minister Denys Shmyhal announced today that over 200 million hryvnias from local budgets and budgetary institutions will remain at the disposal of local authorities.

"For those communities that objectively won't have enough funds, the state will provide basic support and leave a reverse subsidy. Thus, the budget resources at the local level in 2024 will be 75 billion hryvnias more than they were in 2021 before the full-scale invasion," he added.

What are the risks?

Finance Minister Serhii Marchenko emphasizes that the main risks are associated with international aid. If it does not arrive on time, it will create problems. In such a case, the government will have to raise funds within the country, which could have a negative impact on economic dynamics.

"We would not want to somehow provoke or create problems in the future for the macroeconomic stability achieved at the cost of extraordinary efforts. We are doing everything to attract these (external) funds," he said.