Almost ten times more was spent on repaying the loan for the social reform than on the project itself
This is reported by the Accounting Chamber in its conclusions following an analysis of the report on the implementation of Ukraine’s state budget for 2025.
This concerns the Ministry of Social Policy’s budget programme ‘Modernisation of the social support system for the population of Ukraine’.
Direct expenditure on the project in 2025 amounted to 157 million hryvnias. This is 86.4 per cent less than the planned amount — in fact, only 13.6 per cent of the annual plan was implemented.
At the same time, 1.5 billion hryvnias were allocated to servicing and repaying the loan obtained for the project. This is approximately 9.6 times more than was spent during the year on the modernisation of the social support system itself.
The Audit Office does not specify in the data provided which part of the 1.5 billion UAH was allocated to the repayment of the principal amount of the loan and which part to its servicing.
These figures also serve different purposes. UAH 157 million represents expenditure on implementing the project’s activities, whilst UAH 1.5 billion represents debt repayments on a previously raised loan. Therefore, this concerns the ratio between the actual funding of the project and the costs of the loan, rather than overspending within a single programme.
Why the project was only partially funded
The conclusions did not specify the particular reasons for the low implementation rate of the Ministry of Social Policy’s programme in particular.
At the same time, the Audit Office explained the general problems with the implementation of public investment projects funded from a special fund through grants and loans from international partners.
Among the main reasons cited by the auditors were the need to align legislation and procurement procedures with the requirements of the International Bank for Reconstruction and Development, the restructuring of certain projects, and the lengthy process of agreeing documents with partners.
As a result, the implementation of some programmes was postponed. At the same time, the state made payments on servicing and repaying loans already taken out on time, in accordance with the approved schedules.
Investment programmes were underfunded by 59.6 billion hryvnias
The situation with the social support modernisation project was part of a wider problem with the implementation of public investment programmes.
In 2025, expenditure and the provision of loans for their implementation fell short of the plan by 59.6 billion UAH, or 47.6 per cent. The main areas of such investment were infrastructure development and rehabilitation, as well as education.
The plan was to spend 40.6 billion UAH from the General Fund, but only 34.9 billion UAH was actually allocated. The shortfall amounted to 5.7 billion UAH, or 14 per cent.
Programmes under the special fund, which were financed by grants and loans from international financial organisations, performed significantly worse. Of the planned 84.5 billion hryvnias, 30.6 billion hryvnias were spent — 53.9 billion hryvnias, or 63.8 per cent, less than planned.
Consequently, it was precisely the projects linked to international funding that had the lowest level of implementation.
Why does the state pay for a loan even when a project is delayed?
Loan repayments and interest payments are made according to the schedule set out in the loan agreements. Delays in procurement, approvals or the execution of works do not release the state from its debt obligations.
Consequently, the budget may continue to spend funds on the loan even when the actual implementation of the project it is financing lags behind the plan.
The Accounting Chamber has warned that the incomplete and untimely use of loans for public investment projects creates two main risks.
Ukraine may lose the opportunity to secure additional resources for the recovery and development of the energy sector, infrastructure and transport. Furthermore, the debt burden on the budget is increasing without a corresponding economic benefit, as the loan must be serviced regardless of the actual progress of the project.
At the same time, the weighted average cost of all Ukraine’s external borrowing in 2025 fell from 3% to 1.2%. For loans from the special fund, through which some investment projects are financed, it has, conversely, risen from 4.3 per cent to 5.2 per cent.
What was recommended to the government
The Verkhovna Rada Committee on Budgetary Matters considered the Audit Office’s findings on 14 July. Following the meeting, the committee approved a draft resolution on the government’s report on the implementation of the state budget for 2025 and recommended that parliament adopt it.
The Cabinet of Ministers was advised to analyse the shortcomings identified, prevent breaches of budgetary legislation and implement the Court of Auditors’ recommendations.
Specific recommendations relate to improving the planning of budgetary expenditure, managing public debt, attracting international aid and ensuring the timely use of funds earmarked for state programmes.
The Audit Office emphasised that delays in implementing investment projects funded by loans already secured lead to a situation where the budget meets its debt obligations, but the planned social, infrastructure or economic outcomes are postponed.
Follow us on Telegram.
