What are the two scenarios outlined in the Budget Declaration for 2026–2028?

The Cabinet of Ministers has recently approved the Budget Declaration for 2026–2028 and submitted it to the Verkhovna Rada for consideration.

Submitting the declaration is one of Ukraine’s structural benchmarks under the IMF programme, which had to be fulfilled by the end of June. The Budget Declaration serves as the foundation for medium-term budget planning, setting key fiscal benchmarks for the next three years.

Last year, the government submitted a declaration for 2025–2027, but Parliament did not support it. This year’s document was again submitted with a delay, raising questions about whether it will be adopted this time.

The main feature of the new declaration is the inclusion of two development scenarios — baseline and alternative.

The baseline scenario (“positive”) assumes a significant improvement in the security situation in 2026 and a gradual reduction in defence spending.

In fact, defence and security expenditures for 2026 are already projected to be lower than in 2025 (even under the initial plan). Still, defence remains a top spending priority.

The “positive” scenario projects the following macroeconomic indicators:

• Real GDP growth: 4.5% in 2026, 5% in 2027, and 5.7% in 2028
• Year-end inflation: 8.6% in 2026, 5.9% in 2027, and 5.3% in 2028
• Average exchange rate: UAH 44.7 per USD in 2026, UAH 45.2 in 2027, and UAH 45.6 in 2028

The alternative scenario, in turn, models a “negative” trajectory involving a prolonged phase of active hostilities.
However, this scenario is less detailed and outlines only broad trends:

• Slower economic growth: 2.4% in 2026, 4.6% in both 2027 and 2028
• Higher inflation pressure: 9.9% in 2026, 9.4% in 2027, and 7.5% in 2028
• Further reduction in non-military expenditures.

The analytics have been published and adapted for an international audience with the support of the International Renaissance Foundation.