Sep 17th 2025|3 min read
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Since Russia invaded, Ukraine has each year named a price. After setting the budget, the government publishes the sum by which its revenues are expected to fall short of spending. Then, friendly governments, aided by the IMF, cajole one another into filling the gap. This year they will stump up $38bn, an amount equivalent to a fifth of Ukraine’s GDP.
Next year’s process, however, is proving tougher than normal. On September 15th Yulia Svyrydenko, Ukraine’s prime minister, estimated that $50bn would be required—far more than expected by foreign governments, which have so far pledged only $31bn. Sustained fighting is straining Ukraine’s finances, just when foreign politicians’ and international institutions’ enthusiasm to help is flagging.
The country’s two biggest funders are America and the EU. Both rely on forecasts by the IMF, its third-biggest, which had envisaged an end to fighting this year. In such a scenario, reconstruction and the need to deter Russia would have sucked up cash, but hundreds of thousands of men would have returned to work. Defence outlays would have tapered off and the economy would have started to recover. By 2027, the IMF reckoned, Ukraine’s deficit would have fallen below 5% of GDP. Much less external support would have been required.
Now, after failed peace talks, Ukrainian officials must instead plan for more fighting. Ms Svyrydenko would like to increase defence spending in 2026 to 2.8trn hryvnia ($68bn), a rise of 169bn hryvnia. Day-to-day outgoings are growing, too. Last year the war cost $140m a day, a figure that has jumped to $172m. The government has already raised income taxes and put levies on financial institutions, meaning it has few revenue sources left to squeeze.
Donald Trump is sceptical of funding Ukraine’s war and has stopped America’s flow of economic aid to the country. Meanwhile, European governments confront stretched finances of their own. Since last year they have mostly redirected returns earned by Russian central-bank assets, and they are reluctant to go further by seizing the assets themselves. Filling the gap in Ukraine’s budget will mean handouts, which leaders are wary of offering amid belt-tightening at home.
This situation is making the IMF uncomfortable. At the start of September, Ms Svyrydenko asked for a new bail-out to replace a package worth $16bn that is set to expire in 2027. But negotiations have made little progress. The fund reckons that the government may need to spend $20bn more than it currently forecasts by the end of 2027. It can only lend to countries that will be able to repay. American and European support had provided a backstop for Ukraine; now that is less certain.
Conflicts often end owing to the exhaustion of resources, rather than battlefield breakthroughs. The more Ukraine’s supplies run short and the less it has left to pay fighters, the greater the chance it is pushed into talks and an eventual settlement. Whether that is desirable depends on your perspective. Mr Trump, desperate to claim credit for a peace deal, might think it is. Yet many foreign governments have funded Ukraine so that it would be in as strong a position as possible during negotiations. To them, a settlement forced by Ukraine’s finances would represent a tragedy, and a waste of money. ■
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This article appeared in the Finance & economics section of the print edition under the headline “No end in sight”
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