Ukraine’s Treasury is keeping essential payments moving while local governments wait for money already due to them. For a month, it has processed defence spending, pensions, salaries and social benefits, while other payments have stalled. The paperwork delay causes real harm.
The Payments Stuck
Some 46 billion hryvnias in payments have gone unprocessed. Another 18 billion hryvnias in VAT refunds has been suspended. And 39 billion hryvnias in spending has been pushed to year’s end. In Lviv alone, more than 1.8 billion hryvnias is blocked; street cleaners are quitting.
Municipalities cannot run on the promise that their bills may be dealt with later.
The Diesel Ban
The government’s restriction caught both fountain spending and fuel for school buses. The expenses differ. A rule that cannot distinguish a discretionary fountain from a bus taking children to school is a policy failure, not fiscal discipline.
It also leaves local authorities carrying the consequences of a decision made elsewhere.
The Money Behind the Freeze
Ukraine began January with 477 billion hryvnias in state accounts. Partners were expected to provide $22.5 billion from January through May, but delivered $7.4 billion. An $11.3 billion EU payment replenished the account in June. Then the balance fell 47% in August, to 377.9 billion hryvnias.
The September EU tranche slipped as legislation tied to the funding lagged: the parcel-tax bill passed on 16 September rather than by the end of August. Tax receipts have also fallen short. The calculations put the cumulative shortfall in partner funding at $29.5 billion. The account reaching zero by the end of October is a scenario without new money, not a forecast.
This helps explain why the Finance Ministry is holding cash in the single Treasury account, including money belonging to local communities, to keep soldiers, teachers and pensioners paid. The damage to those communities remains. On 10 September, Finance Minister Serhiy Marchenko said monetary financing of the budget remains a possibility. Ukraine used that route in 2022, when the central bank bought 400 billion hryvnias in government bonds; inflation reached 26.6% that year.
A late vote, a delayed tranche and a badly drawn spending restriction now meet at the same Treasury counter.