While the battlefield dominates headlines, another critical struggle continues behind the scenes. Ukraine is fighting a major financial battle to keep its economy stable during the ongoing war with Russia.
Economic stability plays a vital role in Ukraine’s ability to defend itself and rebuild its future.
According to Sergii Marchenko, maintaining a strong economy is essential for national survival.
He emphasizes that Ukraine wants to become more than just a struggling neighbour to the European Union. Instead, Kyiv hopes to contribute to Europe’s security and stability.
War Experience Shapes Ukraine’s Role in Europe
Since the full-scale invasion in 2022, Ukraine has gained significant military and strategic experience. Marchenko believes this knowledge could help Europe strengthen its defence capabilities in the future.
For this reason, joining the European Union remains one of Ukraine’s top strategic goals.
The EU has already provided major financial support to help Ukraine manage the economic consequences of war.
EU Approves Major Financial Support
The European Union recently approved a €90 billion loan package to support Ukraine’s government finances over the next two years. The European Parliament has already approved the plan, and the first payment could arrive soon.
This loan forms the largest part of a broader $136.5 billion international support package designed to stabilize Ukraine’s economy.
According to the finance ministry, this external assistance remains critical after years of economic disruption caused by the war.
Taxes Rise to Support the Military
Ukraine’s government has also increased domestic revenue to support national defence.
In December 2024, authorities introduced higher taxes for the first time since the conflict began. The changes affect personal income, small businesses, and financial institutions.
These measures should bring about $67.5 billion in domestic revenue this year, representing a 15% increase compared with the previous year.
However, Ukraine still faces significant financial pressure.
Budget Gap Remains a Major Challenge
The government’s 2026 budget outlines spending of around $112 billion, with nearly 60% allocated to the military.
This leaves an estimated $45 billion funding gap that Ukraine must cover through international support and additional reforms.
To reduce the deficit, the government plans new tax measures that must pass through parliament soon.
IMF Loan Comes With Reform Conditions
The International Monetary Fund recently approved an $8.1 billion loan to help Ukraine stabilize its finances.
As part of the agreement, Ukraine must introduce several reforms. Digital platforms will face higher taxes, and certain value-added tax exemptions will be reduced.
Kyiv already received the first $1.5 billion payment earlier this month.
International lenders also encourage Ukraine to improve tax collection and reduce tax evasion in order to strengthen government revenues.
Political Tensions Affect EU Funding
Although the EU loan offers crucial support, political disagreements within Europe have slowed the process.
Viktor Orbán has delayed approval of some financial measures. Hungary accuses Ukraine of restricting oil supplies through infrastructure routes affecting Hungarian imports.
Ukrainian officials argue that ongoing Russian attacks have damaged pipelines and delayed repairs.
The situation means Ukraine is closely watching upcoming elections in Hungary, which could influence future support decisions.
Economic Risks Continue
Despite international aid, Ukraine’s economy remains under heavy pressure.
Some analysts warn that continued military spending and tax increases could create long-term economic risks.
For example, the Ukrainian Institute of the Future recently suggested that prolonged conflict and rising taxes could push the country toward economic instability if reforms fail.
Comparing Economic Strain
The war has also placed pressure on Russia’s economy. However, the financial burden looks very different between the two countries.
Russia currently spends about 5.1% of its GDP on military operations, while Ukraine dedicates nearly 27% of its GDP to defence.
This difference highlights how heavily the conflict weighs on Ukraine’s financial system.
The Hidden Frontline
While soldiers fight on the battlefield, Ukraine’s government fights another critical war in the financial arena.
Securing international loans, increasing domestic revenue, and managing economic reforms have become essential tools in sustaining the country’s defence and preparing for its long-term recovery.
