UKRAINE’S FISCAL SPACE UNDER FULL-SCALE WAR: THE IMPACT OF BUDGETARY IMBALANCES ON EDUCATION SECTOR FINANCING

Abstract

The full-scale war has fundamentally transformed Ukraine's fiscal space, placing unprecedented pressure on public finances and intensifying competition for limited budgetary resources. Under these conditions, the education sector has faced growing challenges related to funding adequacy and sustainability. This article examines the transformation of Ukraine's fiscal space during 2018–2025 and analyses the impact of budgetary imbalances on education sector financing. The study investigates changes in GDP, budget revenues, and public expenditures. It demonstrates that, despite nominal GDP growth, the state's real fiscal capacity remained constrained by inflation, expanding defence expenditures, and increasing dependence on external financial assistance. Particular attention is paid to structural shifts in the consolidated budget following the onset of the full-scale war in 2022. The findings show that defence spending became the dominant component of the budget, while the relative shares allocated to education, healthcare, and social protection declined. The study also evaluates compliance with Article 78 of the Law of Ukraine "On Education", which stipulates that public expenditure on education shall amount to no less than 7% of GDP. The findings reveal systematic underfunding of education throughout 2021–2025, with actual expenditure ranging from 4.39% to 5.73% of GDP. In addition, the study assesses the implementation of planned funding across different levels of education and identifies persistent gaps between planned and actual funding, particularly in higher education. It is concluded that the wartime transformation of fiscal policy has narrowed the state's capacity to invest in human capital development, thereby increasing risks to the quality, accessibility, and long-term sustainability of Ukraine's education system.