The Centre for Economic Strategy analyzed Ukraine’s budgetary situation over the three years of the war and organized a discussion in partnership with the Kiel Institute for the World Economy (IfW Kiel) on the state and resilience of public finances.

Author: Oleksandra Myronenko, economist at the Centre for Economic Strategy.

2024 marked the third year of Russia’s full-scale war against Ukraine, continuing to present unprecedented challenges for the country’s economy and fiscal policy. Military demands, infrastructure destruction, energy shortages, and the migration of the working-age population have become defining factors of Ukraine’s economic landscape.

Fiscal policy has adapted to wartime realities, with the structure of budget expenditures remaining largely consistent with 2023:

• 51% of the budget was allocated to defense and security;
• 20% was directed toward social benefits, including pensions;
• 5.6% was spent on servicing public debt;
• the remaining funds were distributed across education, healthcare, and other government functions.

Since the start of the full-scale invasion, the state budget’s own revenues have fallen short of covering all necessary expenditures. The overwhelming majority of domestic resources have been directed toward supporting the Defence Forces.

The general government sector (GGS) consists of the state, local budgets and budgets of social funds. GGS own revenues are taxes and other budgetary charges, and do not include international assistance in the form of grants and aid as part of the own revenues of budgetary institutions.

The General Government Sector’s (GGS) own budget revenues were sufficient to cover only 54% of total expenditures. According to our calculations, in 2024 Ukraine allocated UAH 2,153 billion (equivalent to 27.9% of GDP, or $54 billion) from its own budget revenues to finance the war. However, this figure does not reflect the full scope of military spending, as a portion is also covered through international defence aid. In total, Ukraine’s war-related expenditures amount to UAH 2.8 trillion, or 36.4% of GDP.

International partners cover the rest of the budget expenditures. In 2024, Ukraine received UAH 1.16 trillion in grants and other non-refundable assistance from donors, or 28% of the state budget revenues.

In total, international donors provided $41.6 billion in financial support for Ukraine’s 2024 budget, including $29 billion in loan financing and the remainder in grants.

According to estimates by the Kiel Institute, donors allocated $151.5 billion in military aid and $20.4 billion in humanitarian assistance to Ukraine between 2022 and 2024. Over the same period, the Ministry of Finance reports that Ukraine received $76.8 billion in loans and $38.4 billion in grants from international partners.

In 2024, the amount of public and publicly guaranteed debt increased to UAH 6.98 trillion ($166.1 billion, or 90.4% of GDP). The public debt amounted to $159.2 billion, while the state-guaranteed debt was almost $7 billion.

An important factor in shaping the 2024 budget at the end of 2023 was the assumption that the active phase of hostilities would ease. Policymakers anticipated a significant reduction in security risks in the second half of the year. Based on this assumption, the Ministry of Economy forecast nominal GDP for 2024 at UAH 7,824.8 billion, with real annual growth of 5% and an average annual inflation rate of nearly 14%. However, these expectations did not materialise.

By February 2025, Ukraine had marked the third anniversary of the full-scale war, and the economy had grown by only 3.4% in 2024. As a result, nominal GDP fell short of the UAH 7.8 trillion forecast. Nonetheless, due to a GDP deflator of 12.6%, the gap was nearly offset.

While year-end (December-to-December) inflation stood at 12%, the average annual inflation rate declined to 6.5%, driven by very slow price growth during the first half of the year.

For more details, see the paper on Ukraine’s public finances during the war and their impact on the country’s economy. The publication was updated on 9 April.

The research was conducted with support of the International Rennaissance Foundation.