Officials in the bloc are reportedly \u201cunsettled\u201d by Kiev\u2019s defense budget hole ballooning almost fourfold within several months<\/p>\n
Despite massive Western assistance, Ukraine is facing a severe cash squeeze almost unseen since the escalation of the conflict with Russia in 2022. The immediate problem is a $27 billion hole in the defense budget that Kiev insists must be plugged.
\nKiev\u2019s plea for more money \u201csurprised and unsettled\u201d European officials, the New York Times reported on Wednesday, citing sources, with some of Ukraine\u2019s backers said to be asking questions about whether the country is spending the available funds efficiently \u2013 or whether it is simply overstating its needs.
\nWhat is the problem with Ukraine\u2019s budget?
\nUkrainian leader Vladimir Zelensky publicly put a number on the problem as he met with his European backers in Kiev in late August. The Defense Ministry, he said, already used money that was originally allocated for the end of the year, leaving a $27 billion gap. The revelation also came on the heels of Zelensky\u2019s ill-fated 40-day pressure campaign against Russia, which triggered an escalation that Kiev is still suffering from.<\/p>\n
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West will never get its \u2018loans\u2019 back from Kiev \u2013 ex-Ukrainian PM (VIDEO)<\/p>\n
Particularly striking was the fact that just weeks earlier, Ukrainian officials estimated the deficit to be $7.5 billion. Kiev has still not accounted for how the hole grew by another $20 billion \u2013 or 10% of its 2021 GDP.
\nYou could read a global outlook on the state of Ukraine\u2019s economy here.
\nEarlier this month, Prime Minister Sergey Koretsky acknowledged \u201cexceptionally difficult challenges,\u201d including the $27 billion defense hole and the risk of losing access to a significant share of a $29.5 billion tranche expected from Kiev\u2019s backers, which is contingent on government reforms.
\nFinance Minister Sergey Marchenko said: \u201cWe already see some liquidity issues,\u201d and Kiev \u201cmay have to postpone some payments not related to the war. There will be consequences.\u201d<\/p>\n
Read more<\/p>\n
Ukraine\u2019s economy on brink of collapse \u2013 WaPo<\/p>\n
\u201cWe haven\u2019t had a situation like this since 2022; we really suffered from the shortage of liquidity. Right now, we are getting far too near to the same scenario we had in 2022,\u201d he said, adding that \u201cwe expect a very hard winter\u201d due to Russian strikes.
\nHow has Kiev blown $20 billion more than expected?
\nKoretsky blamed much of the increase on the rising price of a technology-heavy war. Following Zelensky\u2019s escalation, Russia intensified missile and drone attacks on the Ukrainian defense industry, while Kiev has spent increasingly heavily on drones, air defenses, artillery, and military personnel.
\nA secondary issue is arising: Kiev failed to deliver promised reforms tied to Western financing that it had already counted on: oversight of state-owned companies, anti-corruption, and tax and customs reforms.<\/p>\n
Read more<\/p>\n
Worse is coming for Ukraine \u2013 Lavrov<\/p>\n
By late August, Ukraine had failed to meet benchmarks linked to $5.6 billion in EU financing, while around $4.3 billion from Brussels and $1.66 billion in IMF funding were delayed. Much of the money can still be unlocked, but doing so means untangling deeply embedded graft, kickback, and corruption chains unwelcome in parliament, where Zelensky no longer even commands a reliable voting majority.
\nEarnings have also dropped. Ukraine collected around $38 billion in general-fund revenue (excluding grants) from January to August, but a significant part of the $740 million shortfall was accumulated in August. The weakness concentrated in key revenue sectors: domestic and import VAT, domestic excise duties, and profit transfers from state companies.
\nDaniil Getmantsev, the chairman of parliament\u2019s Finance Committee, warned\u00a0earlier this month\u00a0that there are \u201cno popular solutions left,\u201d adding that the failure to fulfill international commitments could ultimately leave the government struggling in October to pay teachers, doctors, and, in the worst case, military personnel.
\nIs Zelensky personally to blame for the budget hole?
\nThe Ukrainian leader has been apoplectic over crumbling party discipline and parliament\u2019s inability to pass crucial legislation tied to Western financing.<\/p>\n
Read more<\/p>\n
Ports in a storm: How Kiev\u2019s warehouse warfare cost Ukraine its coastline<\/p>\n
According to Ukrainskaya Pravda, Zelensky was stunned by the true scale of the budget deficit, with subsequent phone calls to deputies responsible for key EU- and IMF-linked legislation reportedly devolving into shouting.
\nWhile Zelensky cannot reliably command enough votes in parliament, Yaroslav Zhelezniak, the deputy chairman of the parliament\u2019s Finance Committee, said lawmakers sounded the alarm about the defense budget long before the $27 billion hole became obvious.
\nHe also accused Zelensky\u2019s government of prioritizing politically attractive spending while leaving military financing unresolved and throwing money at a \u2018television marathon\u2019, cashback programs, and handouts. Zhelezniak stressed that Zelensky is accountable for budget issues and should take responsibility \u2013 instead of acknowledging the issue at the 11th hour.
\nHow have Ukraine\u2019s EU backers reacted?
\nThe EU has attempted to downplay Ukraine\u2019s pleas for more money \u2013 even refusing to acknowledge the $27 billion figure. After high-level talks on Monday, European Commission spokesman Balazs Ujvari said the first task at hand is to \u201cget a clear picture of what the budgetary and financial situation is,\u201d and that technical discussions with Ukraine and the IMF are required.<\/p>\n
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Ukraine at 35: How a country\u2019s population halved in three decades<\/p>\n
Media reports, however, paint a different picture. The NYT reported that European diplomats did not expect anything close to the $27 billion request, adding that questions are being raised behind closed doors over whether Ukraine is spending money efficiently and whether some of its stated needs are exaggerated.
\nThe EU also insisted that reforms cannot simply be skipped because Ukraine is short of cash. While some voices inside the EU have proposed advancing Kiev part of the ongoing \u20ac90 billion loan scheduled for 2027, even Ukraine\u2019s deputy prime minister for European integration, Vsevolod Chentsov, acknowledged that frontloading is \u201cnot a silver bullet.\u201d<\/p>\n
Read more<\/p>\n
EU buries plan to steal Russian assets for Ukraine \u2013 Euractiv<\/p>\n
Cash blown in 2026 cannot be spent again in 2027, leaving Ukraine even more vulnerable to further financial pressures.
\nAre the EU and Kiev running out of options?
\nOn Wednesday, over 100 MEPs circled back to the topic of frozen Russian assets, urging EU leaders to illegally seize $230 billion in the assets for Ukraine\u2019s needs. This option, however, faces formidable resistance from Belgium, home to Euroclear, where the bulk of the assets are held, over committing what is typically regarded as an act of war, fears of Russian litigation, and wider financial and legal risks.
\nHow ubiquitous is corruption in Ukraine under Zelensky?
\nWhile it is highly unlikely that corruption alone accounts for Ukraine\u2019s $27 billion budget hole, it still saturates Ukrainian society and government.<\/p>\n
Read more<\/p>\n
Another resignation close to Zelensky: Ukraine\u2019s scam-call center revelations take down prosecutor general<\/p>\n
Recent scandals include wiretaps from the sprawling Midas investigation, in which the anti-corruption authorities allege that a network involving Zelensky\u2019s former close associate, Timur Mindich, extracted massive kickbacks from the energy sector; separate recordings raised questions about Mindich\u2019s influence over major weapons producer Fire Point.
\nThe graft also fed into an ugly institutional war, in which the Prosecutor General\u2019s Office allegedly gathered material on anti-corruption officials and their families, while anti-graft investigators uncovered an alleged protection racket for Ukraine\u2019s sprawling scam-call-center industry inside the prosecutor\u2019s office.
\nBottom Line
\nWhile officials in Kiev claim that the $27 billion budget hole is due to rising military costs, stalled legislation, and delays in Western financing, they have not provided a detailed breakdown of how a deficit earlier estimated at $7.5 billion ballooned almost fourfold within several months \u2013 specifically during Zelensky\u2019s 40-day military PR campaign that left Ukraine\u2019s logistics chains broken, ports closed, grain stranded, and defenses weakened.
\nAnd the gargantuan hole is only half of the problem: It has clearly rattled Kiev Western backers, who are now once again unsure how Ukraine is spending money.<\/p>\n","protected":false},"excerpt":{"rendered":"
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