In-Depth Review of the 2026 Non-Military Budget: Social Spending

This analytical note is part of a series of reviews of the non-military budget-2026 and examines social expenditures, which in wartime remain the second-largest expenditure item in the general government sector after defence. The share of social expenditures in total expenditures decreased from 16% in 2022 to 10% in 2024, despite the nominal growth of the budget. However, this area needs changes, as strategic investments in people and their return to economic activity are the foundation of post-war recovery.

Pensions

Pensions Despite a nominal increase in the average pension by 70% over four years of full-scale invasion, its real value has only increased by 4%. The system needs unification due to the presence of special pensions (for judges, prosecutors, miners), which creates inequality, allowing retirement at 45-50 years. However, the abolition of benefits will not solve the problem of structural deficit. The main threats remain the demographic crisis and the shadowing of the labour market, which is why pension reform needs to be considered in the context of employment policy and fiscal policy.

We recommend unifying legislation (primarily, reducing the gap between special and general pensions), synchronising pension reform with the policy of de-shadowing the labour market and demographic recovery.

Support in difficult life circumstances

Expenses for the accommodation of IDPs stabilised at around 40 billion UAH after peaking in 2023, but 73% of displaced persons remain in their new locations without proper integration for more than two years. Only monetary contributions do not solve housing and employment issues.

We recommend transforming payments to IDPs and low-income individuals into reintegration tools, assisting with retraining, employment, and childcare. Establish a clear indicator to track effectiveness: the proportion of individuals who exited the program within a year due to employment.

Child and Family Protection

The 2026 budget allocates 24.5 billion UAH for a new program “promoting the combination of parenthood with work,” which partially repeats the existing “Municipal Nanny” program and lacks a clear financial and economic justification regarding its impact on the labour market. The system of social protection for children and families remains fragmented among various authorities (Ministry of Social Policy, Ministry of Education, Ministry of Health), which hinders processes.

We recommend consolidating all child care and support programs under one administrator to eliminate the duplication of functions between ministries, as well as introducing transparent child expenditure norms and ensuring their public comparison.

Our general recommendation for all areas is to integrate the registers of the Ministry of Social Policy, the Pension Fund of Ukraine, the Tax Service, and “Diia” for automated monitoring and verification of payment statuses.

The research is prepared with the support of the International Renaissance Foundation.