Back
Automatically translated version. May contain inaccuracies compared to the original.
In mid-September it became known that the government suspended funding for all capital expenditures due to a shortage of money in the budget. Government officials did not announce this publicly, so major contractors brought the news to the public by announcing the forced suspension of work on budget projects.
Officials did not comment on the situation, and only on 28 September did Prime Minister Serhiy Koretskyy make a statement: “The government has made a decision that determines the prioritization of state expenditures. First and foremost we fund defense, pensions and social payments, as well as salaries for teachers, doctors and other public-sector employees. Expenditures that are not priority will be postponed. This concerns new construction, reconstruction and capital repairs that are not critically important, as well as beautification projects such as parks, squares, fountains, or the relaying of cobblestones.”
The prime minister explained the reason for the budget shortfall as follows: “Part of the planned international financing has not yet arrived. In particular, because Ukraine has failed to meet some of the obligations it undertook to international partners” (LB.ua explained the reasons and possible consequences of the delay in detail ).
He also urged local self-government bodies “to likewise set priorities in their budgets and limit expenditures that are not a priority right now.” Preparations for winter are not listed among the priority items that will be funded. LB.ua looked into whether this means that the process will be put on pause.
Sheltering over a critical infrastructure facility
“Because of problems with the receipt of international financing, the Ministry of Finance moved part of the capital expenditures planned for September–November to December. In particular, this concerns funds for protecting the energy sector and preparing for winter,” said Roksolana Pidlas, chair of the Verkhovna Rada Committee on Budget Issues, on the “Economic Pravda” podcast.
The list of capital expenditures includes construction, including educational and medical facilities, social housing; installation of shelters; protection of the energy sector. Overall, this means postponing 39 billion hryvnias of capital expenditures to the end of the year in calculations as of September.
“When we talk about capital expenditures, we understand that postponing them to December means that they simply will not be financed this year at all, because it will be impossible to do,” Pidlas noted.
“Today the state, in one day, without warning, any discussion or dialogue, stopped financing all capital expenditures. Salaries in entire sectors of the economy, interest on loans, settlements with suppliers — these are certainly not the main concern of deputies or the Ministry of Finance; they have their own business plan, and we are simply presented with the fait accompli. Because of this Autostrada is forced to stop work on all sites,” said Maksym Shkil, owner of the company Autostrada, which builds bridges and roads.
Maksym Shkil inspects the progress of construction at one of Autostrada’s projects — a bridge complex in the Chernihiv region
Local self-government representatives were not as categorical as Shkil, but according to LB.ua, the news of the suspension of all payments was just as unexpected for them as it was for large contractors. “Everything stopped at once, all the mayors are in shock, they’re discussing it among themselves, this is not going out to the public. The person (the prime minister, — Ed.) just stopped everything with a phone call,” one city mayor emotionally described the initial reaction of city leaders, emphasizing that no one at the local level received warnings and simply saw that payments were blocked.
The suspension of funding for capital expenditures affected absolutely all budget payments, and projects financed from local budgets were no exception. It does not matter who the client for the work is: a ministry, the Recovery Agency, or a city council executive committee. They all make payments through the State Treasury, which is not allowing any expenditures that do not concern salaries and social payments. Budget funds are a single financial pool, and the deficit affects all of that money regardless of which regional bucket they were in.
According to Pidlas, funding problems arose in part because of delays in Ukraine fulfilling obligations on which the receipt of international financial assistance depends. As an example, Pidlas cited the bill to cancel the exemption on duty-free importation of international parcels. According to her, it had to be adopted by the end of August to obtain the EU tranche in mid-September, but the vote took place only on 16 September, which means the funds will arrive at the end of October. For 2026 year Ukraine expected to attract $50,8 billion in international financing, but due to delays in meeting requirements as of mid-September it received about $21 billion. The chair of the budget committee does not assess the method the government used to stop payments and urges MPs to return to fulfilling financial obligations to the EU.
However, the Association of Ukrainian Cities immediately issued a critical statement on the matter. Oksana Prodan, adviser to the head of the AUC, noted that the government should have anticipated possible cash problems in advance and made changes to expenditure items through amendments to the state budget. “In a parliamentary-presidential republic the government cannot allow itself to want or not want to pay. The government cannot unilaterally stop these payments without a decision of the Verkhovna Rada,” Prodan believes.
The Center for Economic Strategy explained to LB.ua that the claim about the government acting unlawfully without a parliamentary decision is not true. “The order of payments is specified in paragraph 19 of Resolution 590, where the sequence of payments made by the State Treasury is laid out. And paragraph 22 of the transitional provisions of the Budget Code even allows not only deferring but, if necessary, reducing expenditures by government decision and directing them to defense. Also, the Ministry of Finance can impose a temporary restriction on general fund appropriations if receipts are insufficient (article 54 of the Budget Code),” commented Bohdan Slutskyi, an economist at the Center for Economic Strategy.
Bohdan Slutskyi, economist at the Center for Economic Strategy
However, the Association of Ukrainian Cities emphasizes that the suspension of payments has already affected measures to protect the energy sector, preparation for the heating season, elimination of the consequences of Russian strikes and housing restoration. This jeopardizes the adequate implementation of resilience plans.
Kyiv was no exception: payment for certificates of completed works under the capital resilience plan for the capital was also suspended. But a source at the Kyiv City State Administration told LB.ua he hopes this is a temporary phenomenon that will not affect preparations for winter. “We all hope that within a month the situation will be resolved, and we understand the reasons that led the government to this step,” the official said.
At a meeting of the temporary investigative commission of the Verkhovna Rada on the implementation of the Kyiv resilience plan, which took place on 25 September, MPs asked the relevant minister how they are getting out of the situation when payments are suspended. “Right now contracting organizations are running ahead and the volume of work they have completed is higher than what they have actually received payments for. In fact they are working on their own working capital. Which allows us to be confident in fulfilling obligations on orders from the Recovery Agency,” said Minister of Recovery, Infrastructure and Transport Mykola Kalashnyk.
Minister of Recovery, Infrastructure and Transport Mykola Kalashnyk
This effectively means that the Recovery Agency’s contractors are working solely on trust in the client, who promises to meet its financial obligations later. The state and the KSCA finance works under Kyiv’s resilience plan in a proportion of 50/50.
Maksym Shkil, who is a contractor for the state on many road projects, commented on the payment situation far less optimistically. “This is not a partnership approach. When parliament was blocked and did not vote in the spring, the market was asked to build roads with payment deadlines in September and December. And when in September we put the certificates on the table, the payments were simply stopped. This does not build trust. Why wasn’t this all planned?” the owner of Autostrada commented.
Prime Minister of Ukraine Serhiy Koretskyy
Judging by Serhiy Koretskyy’s statement, the government is now betting that together with the Verkhovna Rada the schedule for passing laws needed for reforms will be “caught up,” and that it will be able to unblock the assistance promised by Europe. “The government, for its part, is doing everything necessary to meet its obligations and to obtain the planned international financing. We are working jointly with parliament. And here responsible work from deputies of all factions and groups is important,” the prime minister said.
Document: PDF proof of the original version of the news item "Держказначейство зупинило всі платежі. Що буде з місцевими бюджетами і підготовкою до зими". It records the publication content at the moment of the first scan, the preservation date and the source: LB.ua.
