Can Ukraine Afford Its Own Defense?

For Ukraine, affording its own defense means keeping soldiers paid, buying weapons, and sustaining military operations despite a damaged economy. It does not mean financing the entire war without help. It means having enough reliable money from taxes, economic activity, borrowing, and foreign partners to prevent defense spending from overwhelming the national budget.

The pressure is unusually severe. Ukraine’s GDP contracted by nearly 30 percent in 2022, yet spending on military equipment and salaries rose 640 percent. In August, officials said another $27 billion was urgently needed for defense. Austerity measures later reduced the gap to $20 billion.

European support remains central, but it is not guaranteed. The European Union has linked $38 billion in available support to anti-corruption and tax reforms. Ukraine must therefore balance battlefield needs, public finances, and reform demands while Russian attacks continue and the war becomes more expensive.

Ukraine faces large shortfalls both immediately and in the years ahead. Officials initially said the 2025 defense budget needed an additional $27 billion. After austerity measures, the reported gap fell to $20 billion. These figures show that current military costs already exceed what the budget can comfortably cover.

The longer-term picture is also severe. The Kyiv School of Economics estimates that Ukraine’s 2027 budget faces a $32.6 billion gap. President Volodymyr Zelensky asked the European Union to release money early from a loan planned for 2027, but the bloc did not simply approve that request.

Instead, the EU reportedly pressed Ukraine to pass anti-corruption and tax reforms to unlock $38 billion already offered. One key revision passed, unlocking some aid, but it remained unclear whether all reforms would pass. Economic growth is expected to remain weak, adding pressure beyond defense spending.

War creates a damaging mismatch for Ukraine: economic activity falls while the government must spend far more on defense. Russia’s invasion reduced production and damaged major industries, shrinking the tax base and national income. At the same time, Ukraine had to expand military operations, equipment purchases, and personnel costs.

The figures capture the imbalance. Ukraine’s GDP contracted by nearly 30 percent in 2022, the first year of the invasion. Yet spending on military equipment and salaries increased 640 percent. Officials later attributed part of the defense gap to higher military salaries and the cost of procuring drones.

Foreign financial support helped Ukraine get through earlier years without major budget concerns. Europe has now become its biggest financial supporter, replacing the United States in that role. But future assistance is connected to reforms, while Russian attacks continue to weaken the economy and raise war costs.

The European Union has linked continued financial support to reforms designed to strengthen Ukraine’s public institutions and revenue system. The requirements include anti-corruption legislation and tax reform legislation. They matter because the EU is offering major financial backing while seeking safeguards for how Ukraine governs and raises money.

The pressure became urgent after Ukraine requested more defense funding. Zelensky asked the EU to release money early from a loan intended for 2027. The bloc reportedly rejected that approach and instead pressed Ukraine to complete reforms that could unlock $38 billion already on offer.

Ukraine’s parliament passed one key revision on Thursday, unlocking some EU aid. However, it remained unclear whether all required reforms would pass. The issue is politically difficult because corruption was the top concern for 50 percent of respondents in a September poll, while lawmakers were described as showing limited urgency.

If Ukraine does not complete the required reforms, it risks delaying or losing access to European money already offered. That would deepen a budget problem that officials initially placed at $27 billion for defense, later reducing it to $20 billion through austerity. The country would have fewer reliable resources for the war.

The key mechanism is conditional support. The EU reportedly tied $38 billion to anti-corruption and tax legislation rather than releasing all requested funds immediately. Ukraine’s parliament passed one revision and unlocked some aid, but the response to incomplete reforms remained unclear. Partial compliance might not satisfy European requirements.

The consequences would extend beyond this year. Ukraine’s 2027 budget already faces a $32.6 billion gap, while Russian attacks threaten industries, jobs, and tax revenue. Experts still expect substantial European backing, but they warn that future programs should not be treated as guaranteed.

Russian attacks worsen Ukraine’s budget problem by weakening the economic sources that generate taxes. The article identifies steel and grain as major industries increasingly targeted by Russia. Damage to those sectors can reduce production and exports, leaving the government with less revenue while wartime needs continue rising.

The projected effects are substantial. The Kyiv School of Economics reported that increased Russian attacks and other factors could cause a further loss of 450,000 jobs. It also estimated a further loss of as much as $4.9 billion in tax revenue. Those losses would directly reduce the money available for defense and public services.

The broader economic outlook is weak. The World Bank expects GDP growth of only 1.2 percent this year and 1.5 percent next year. At the same time, analysts expect the war to become more expensive. Falling revenue and rising costs could enlarge future budget gaps.

A government at war may need to spend more precisely when its economy produces less taxable income. Ukraine’s invasion-related contraction reduced domestic resources, while military salaries, equipment, and drone purchases drove costs higher. Foreign aid and borrowing provide money when taxes alone cannot cover defense and essential public spending.

Ukraine’s experience shows the mechanism clearly. Its GDP contracted nearly 30 percent in 2022, but military equipment and salary spending rose 640 percent. Earlier support from the United States, Europe, and others helped it manage the yearly budget. Zelensky later sought early access to a European loan planned for 2027.

This financing is not automatic. Europe has become Ukraine’s biggest financial supporter and reportedly tied $38 billion to anti-corruption and tax reforms. With a $32.6 billion projected gap in 2027, Ukraine must combine domestic revenue, reforms, loans, and foreign backing to keep funding its defense.