Kyiv: Ukraine is hurtling toward a severe financial crisis as its war with Russia escalates and promised reforms continue to stall, triggering alarm among international donors. Despite ongoing global solidarity, Kyiv faces an enormous fiscal shortfall that threatens to undermine not just its economy but also its war effort and essential public services.
According to projections, Ukraine will need approximately $65 billion annually over the next two years to sustain its war-battered economy and basic government functions. However, only a fraction of this amount less than one-third has been officially secured for 2026 and 2027. The gap between expectations and reality has left policymakers scrambling and Western donors increasingly cautious.
The war, now deep into its third year, has ravaged Ukraine’s industrial base, devastated infrastructure, and displaced millions. With defense expenditure consuming a staggering 31% of the national GDP, there is limited fiscal space for investment in reconstruction, social programs, or administrative modernization. The economic growth rate, previously seen as a hopeful signal of recovery, is now projected to hover at just 2.1% in 2025, far below what is needed for sustainable progress.
Adding to the crisis is a disturbing slowdown in the reform process. Ukraine had committed to major anti-corruption, judicial, and governance reforms as part of its agreements with the European Union and IMF. But many of these benchmarks remain unmet. In particular, the failure to achieve key goals outlined in the EU Ukraine Facility has led to a reduction in disbursements from Brussels, weakening Kyiv's financial standing.
Complicating matters further are growing concerns over political interference. President Volodymyr Zelenskyy has come under criticism for consolidating control over Ukraine’s anti-corruption bodies. His recent moves replacing top officials and reshaping independent watchdogs have sparked backlash from civil society and drawn worried glances from Ukraine’s Western partners, who fear that the integrity of governance is being compromised at a critical juncture.
These developments have put Ukraine’s relationship with donors on edge. Although the international community remains rhetorically committed to supporting Ukraine’s sovereignty and defense, actual funding decisions are increasingly tied to demonstrable progress on governance and transparency. Without renewed political will to reboot reforms, much-needed aid could be delayed or reduced.
In a bid to restore confidence, Zelenskyy has appointed Yulia Svyrydenko as the new Prime Minister a move aimed at signaling administrative renewal and fiscal discipline. Known for her technocratic acumen and previous work in economic planning, Svyrydenko faces the monumental task of bridging the growing financial gap while restoring investor and donor confidence.
Yet the road ahead remains perilous. The Ukrainian government is still reliant on foreign borrowing, donor contributions, and IMF tranches to meet even its most basic obligations such as paying civil servants, supporting displaced families, and maintaining healthcare and education. Domestic revenue sources, such as taxation and local bond markets, are simply not enough to offset the heavy financial toll of war.
Economists and foreign policy analysts warn that unless Ukraine can meet reform targets and convince donors of its institutional credibility, the risk of a funding crisis will deepen potentially weakening its defense capabilities and endangering its broader democratic project. If donor fatigue sets in, and if reform commitments continue to waver, the geopolitical implications could be far-reaching not only for Ukraine but for the stability of Europe as a whole.