There is no plan in place to fund the Ukrainian budget after 2025.
Even if the war ends by the summer of 2025, it will take some time to reduce military expenditures, leaving European nations on the hook. It’s not clear that European elites have fully understood the political costs, however much longer the war continues.
With intensive, U.S.-brokered negotiations ongoing in Saudi Arabia involving separate Ukrainian and Russian delegations, hopes are rising that the Trump administration will finally be able to bring an end to the war.
But even if the war ends tomorrow, it would be unwise to assume that Ukraine could reduce military spending close to prewar levels.
Ukraine now has almost 900,000 men and women at arms, a threefold increase from peacetime, and that doesn’t take into account irrecoverable losses through death and injury. Estimates vary widely, but the casualty rate is commonly thought to number in the hundreds of thousands, with compensation provided to the injured and families of the deceased.
The war in Ukraine has therefore come at a vast financial cost to that country. Ukraine’s defense spending has risen tenfold since the 2021 budget was announced, when social welfare payments were the country’s biggest expenditure.
This has left a gaping hole in Ukraine’s finances that no amount of tax increases or Western donations will be able to fill over a sustained period without political consequences.
Since 2022, Ukraine has run an average budget deficit of over 22% of GDP. Based on the current exchange rate, Ukraine’s budget shortfall in 2025 amounts to around $41.5 billion. And that assumes defense spending falling slightly this year. In the hopefully unlikely event that war continues to the end of the year, the Ukrainian state would need to revise its budget upwards as it did in 2024.
Today, Ukraine’s domestic revenue, including taxes, excise, and duties, just about covers the cost of the defense effort, which in 2024 accounted for 64% of its total budget expenditure. That includes significant tax increases as the war has gone on. Total tax revenue will have risen by more than 100% since the war started and personal income taxes by over 200%. This in a country in which, according to the Wilson Center, 50% of the population lives at a basic subsistence level.
As Ukraine is cut off from international capital markets, it has had to meet the difference through aid and loans from Western nations.
Hellbound and Down 