Ukraine is proposing record defense spending for 2027 against the backdrop of the rising cost of the war with Russia and the need for additional financial support from international partners. Defense expenditures are expected to reach 4.89 trillion hryvnias ($110 billion), a 12% increase over this year.
This amount would account for approximately two-thirds of the total spending in the 2027 draft budget of 7.27 trillion hryvnias, which was presented to parliament on Wednesday. Budget revenues are projected at 5.6 trillion hryvnias.
“This is the sixth budget of the full-scale war, and it is again larger than the previous one. Over these years, the war has become more expensive,” said Roksolana Pidlasa, head of the parliamentary budget committee. According to her, state revenues are not growing at the same pace as expenditures.
The daily cost of the war has risen to $190 million this year, compared to $116 million in 2022, Roksolana Pidlasa reported.
Financial Needs and International Aid
Minister of Finance Sergii Marchenko told parliament that Ukraine will need more than $52 billion in international financial aid next year. The government of Volodymyr Zelenskyy already has commitments from partners for approximately $20 billion and is negotiating to cover the remaining amount.
Sergii Marchenko noted that frozen Russian assets held by Ukraine’s European allies could become a key source for covering the budget gap in 2027.
Members of parliament have until October 1 to review the draft budget and submit their proposals. The spending plan must be passed by parliament in three readings by December 1.
Ukraine’s Financial Situation Becomes More Complex
Ukraine’s financial situation is becoming more complex this year due to intensified Russian strikes on Ukrainian businesses and infrastructure, the Minister of Finance said. According to Sergii Marchenko, as damages grow, budget revenues have begun to shrink, while the Armed Forces of Ukraine require more funding.
Ukraine currently faces an additional unfunded defense financing gap of $27 billion this year, as the country seeks to increase salaries for military personnel and ramp up weapons production.
In the first years of the war, Ukraine funded defense needs with its own revenues, relying on foreign financial aid to cover social and humanitarian expenditures.
Since the beginning of the full-scale invasion, Ukraine has received approximately $198 billion in budget support from foreign partners, the bulk of which came from the EU.
To ensure stable funding from partners, Kyiv must implement tax and public administration reforms, as well as meet a series of financial and budgetary requirements, despite wartime conditions.
On Wednesday, parliament passed a bill in the first reading on the taxation of foreign parcels, bringing Ukraine closer to meeting one of the key conditions for attracting funds from the International Monetary Fund and the European Union.
Sergii Marchenko stated that advancing two important tax and customs reforms brings Ukrainian e-commerce regulations closer to EU standards, strengthens financial stability, and promotes fairer competition for Ukrainian businesses.
According to him, this progress also creates the conditions to attract approximately €4 billion in macro-financial assistance from the EU.
Source: Reuters
