2026 Budget – This is the fourth fiscal plan formed under wartime conditions. The government is trying to adapt to uncertainty in its budgetary policy – the budget is based on a pessimistic scenario from the budget declaration, assuming that hostilities will continue throughout the next year. This aligns with a conservative approach: if the situation improves, public finances will be in a better state.

The 2026 budget allocates expenditures for the war, approximately comparable to previous years – UAH 2.5 trillion or $55.7 billion. This is a significant amount for Ukraine – 24.7% of GDP – but still insufficient to stop the aggressor, who spends about $140 billion annually on the war. Moreover, this is less than planned for 2025. Therefore, it is likely that this amount will need to be revised upwards during the year.

Other areas of state policy – debt servicing, social protection, education, and other sectors – are allocated UAH 2.2 trillion or $48 billion. Together with military expenditures, this amounts to  UAH 4.8 trillion or $104 billion. Meanwhile, the planned own revenues for the budget is only UAH 2.9 trillion or $62.8 billion. Thus, the deficit will reach UAH 1.9trillion, or $41.5 billion, or 18.4% of GDP. This is lower than the deficit planned in the July adjustments for this year – 21.1% of GDP. However, the initial 2025 budget plan also projected a smaller deficit of 18.3% of GDP. Therefore, revising the budget during the year seems even more realistic.

In fact, Ukraine’s own revenues will be enough to finance only defense and security expenditures with some margin, while the rest of the needs will be covered by international aid. Unfortunately, in recent months, the aid has no longer come in the form of grants (free and non-repayable), but mostly as loans. This increases the debt burden, and in the future, these funds will have to be repaid. The state and state-guaranteed debt is forecast to exceed annual GDP in 2026, reaching 106% of GDP. In 2026, the government plans to attract $45.5 billion in external financing. Part of this sum has already been confirmed, but $18.1 billion still needs to be secured.

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