$60 billion in the shadows and a budget deficit: economist names the main financial risks of free public transit

Vladimir Zelensky's initiative to introduce free rides in Kyiv's ground public transport may create additional pressure on national and local budgets.

Free rides in Kyiv's ground public transport, which was ordered by Vladimir Zelensky, could become a serious financial challenge for the state. Economist Oleh Ustenko said that local budgets do not have enough resources to cover the additional costs, and the central budget is already suffering from a colossal deficit. In his assessment, Ukraine risks ending the year with an economic slowdown and inflation at 12%.

The idea of introducing free rides in Kyiv's ground public transport could entail an additional financial burden on the state and the capital. Despite the social appeal of the initiative, its implementation will require substantial funds that are currently lacking for both the central and local budgets.

Economic expert Oleh Ustenko spoke about financial risks of the presidential initiative on air on 24 Channel.

Free transport: who will pay for the rides?

According to the economist, reducing prices for services usually has a positive social effect. However, in wartime conditions and with a large deficit in state finances, implementing such programs requires a separate source of funding.

Ustenko emphasized that local budgets are also in a difficult position, so it is impossible to shift additional costs onto them without corresponding compensation from the state.

"Our budget deficit is colossal," the expert noted.

He also drew attention to the situation with external financing. Of the 52 billion dollars of international aid planned for the year, Ukraine, according to his data, received only 26 billion dollars. The rest of the needed funds are becoming increasingly difficult to find.

The economist stressed that if additional costs cannot be covered by local budgets, funding will have to be sought at the central level. However, the state treasury already has a significant deficit.

The economy may end the year with a decline.

Separately, Ustenko drew attention to a worsening macroeconomic forecast. According to him, the National Bank of Ukraine revised its expectations for economic growth and now forecasts a GDP decline of 0,4% for the year.

For comparison, the state budget had projected growth of 2,5%.

The inflation forecast also worsened. If earlier they expected a figure of less than 6%, now it could rise to 12%.

According to the expert, under these conditions the state has to reexamine expenditures and cut capital investments, prioritizing the security and defense sector.

Ustenko urged not to rely on optimistic scenarios and to consider risks associated with continued Russian attacks on Ukraine's economic infrastructure.

Will international aid save the situation?

The economist also critically assessed the prospects of Ukraine obtaining all the necessary financial support from international partners. In particular, he questioned the possibility of fully meeting an additional request for 70 billion euros.

Among the reasons are internal financial problems of European states and political processes, including elections.

At the same time, Ustenko believes that significant reserves for filling the budget are hidden inside Ukraine itself—in the fight against corruption, criminal schemes, and the shadow economy.

According to his estimates, the share of the shadow sector may exceed 30%, and the volume of economic activity outside official accounting is at least 60 billion dollars per year.

What is known about free rides in Kyiv?

8 November, Vladimir Zelensky ordered the Cabinet of Ministers to develop a program of free rides in Kyiv's ground public transport. The president also tasked creating a reserve of buses in light of interruptions in metro operation and transportation issues due to the Dnieper.

The next day, Kyiv mayor Vitali Klitschko said there were difficulties implementing the transport plans. According to him, the city critically lacks drivers for additional routes, partly due to restrictions on hiring employees.

Additionally, the state owes the capital more than 8 billion UAH in compensation for transporting privileged categories of citizens.

Thus, the issue of free rides in Kyiv remains not only social but also a financial challenge. For the president's initiative to be implemented, the government must determine sources of compensation to carriers, as without additional funding the new costs may become unaffordable for the city budget.

Earlier StopKor wrote that Kyiv proposes to introduce a 45-minute transfer ticket in municipal transport, allowing passengers to transfer between buses, trolleybuses, and the metro without paying again. The author of the petition explains the initiative by additional costs for residents of the left bank during air raid alerts and bridge closures. For consideration by the Kyiv City Council, the petition requires 6000 signatures.