Ukraine's 2027 budget rests on $32.6bn no one has yet pledged

Ukraine's draft budget for 2027 is less a spending plan than a statement of what the state cannot pay for itself. The Cabinet approved it in mid-September for submission to the Verkhovna Rada: UAH 7.272tn of spending against UAH 5.648tn of revenue, with UAH 4.885tn, or 43.8 per cent of GDP, going to security and defence. Tax revenue of about UAH 2.86tn would cover under two-fifths of the total. The rest depends on foreign money, and on the Finance Ministry's own account $32.6bn of the $52.6bn it expects to need from partners next year has no identified source. That uncovered sum, not the record defence line, is the number that matters this autumn.

What the draft contains

The government's summary is brief on macroeconomics and generous on social promises. It sets the average teacher's salary at UAH 27,300 a month in 2027, 65 per cent above the 2025 level, and a floor of UAH 30,000 for doctors. Finance Minister Serhii Marchenko framed the whole document around the war: the draft, he said, had been formed "under conditions of ongoing Russian aggression", and the needs of the security and defence sector "remain paramount". Defence and security absorb about two-thirds of planned spending.

The KSE Institute, which tracks Ukraine's public finances, reads the draft as assuming real GDP growth of 1.3 per cent and average inflation of 8.6 per cent in 2027. It counts UAH 2.49tn of international assistance inside revenue, so roughly 44 per cent of the revenue line is itself foreign money. A further UAH 117.3bn depends on tax legislation that has not yet been passed, and UAH 64.9bn on customs targets being met. The growth assumption is cautious. When the IMF completed its first review of Ukraine's $8.1bn Extended Fund Facility in July, it forecast 3.5 per cent growth for 2027 and 1 to 1.6 per cent for 2026. A budget built on the lower figure leaves some upside on revenue, but not enough to change the scale of the problem.

Where the published figures differ

Readers will meet several versions of the same numbers, and the differences are definitional rather than contradictory. Revenue minus spending in the government's release gives a gap of UAH 1.624tn. KSE puts the deficit at UAH 1.67tn, or 15 per cent of GDP; Ukrainian budget accounting counts net lending by the state in the deficit, which is the most likely source of the difference. Defence is the larger discrepancy. The government's UAH 4.885tn covers the whole security and defence sector, while KSE cites UAH 3.76tn for defence, apparently a narrower classification. Neither is wrong, but comparisons with other countries' defence budgets should use the narrower figure, and comparisons with Ukraine's own earlier budgets should use like with like.

The external requirement also comes in two sizes. The $52.6bn in the Cabinet's release is international support for the state budget. KSE gives a total external financing requirement of $91.6bn, a broader measure, and planned external loans of $38.7bn. The $32.6bn gap is the same in both accounts, which makes it the one figure on which the ministry and independent analysts agree.

Why the gap is harder to close this year

Marchenko has been unusually blunt. In early September he told reporters that the country had not faced such a situation since 2022, when it "really suffered from the shortage of liquidity", and warned that the government might have to postpone some payments not related to the war. He linked the pressure to intensified Russian strikes on logistics and to the cost of the coming winter. President Volodymyr Zelenskyy has separately asked allies to cover a €23bn shortfall at the Ministry of Defence, telling them: "We need more money, much more."

The main instrument on the table is the EU's €90bn Ukraine Support Loan, finalised by the Council on 23 April and agreed by 24 member states through enhanced cooperation. It provides €30bn for budget support and €60bn for defence over 2026 and 2027, is financed by EU borrowing, and is to be repaid only from reparations due by Russia to Ukraine. By 1 September, according to Euronews, €3.2bn of budget aid and €8.35bn of military aid had been paid out. The Commission's chief spokesperson, Paula Pinho, called the existing schedule "a very ambitious disbursement plan" and said that for the moment that was where the Commission's focus lay. Ireland's foreign minister, Helen McEntee, spoke of a consensus to bring funding forward. Bringing it forward helps 2026; it does nothing for 2027 unless the total grows.

The IMF programme is smaller in money but larger in signalling. Total disbursements reached about $2.2bn after the July review. The Fund's board noted that reform implementation had slowed, with several structural benchmarks delayed or missed, and pressed for stronger domestic revenue collection. Ukraine's official creditors have extended their suspension of debt service and committed to a definitive treatment after the war, which keeps bilateral debt payments out of the 2027 arithmetic for now.

The frozen assets return to the table

Kyiv's preferred answer is the Russian central bank reserves immobilised in the EU, which Euronews puts at €210bn. Marchenko has proposed a revised scheme under which responsibility for the assets would be shared by all 27 member states rather than resting on Belgium and Euroclear, which holds much of the money. A similar plan was rejected in December. Sweden, the Netherlands, Spain and Poland have revived the idea, warning that the €90bn loan "will not be enough".

Moscow's position is that any such use is unlawful, and it has acted on that view in court. The Bank of Russia sued Euroclear in Moscow, and in May the Moscow Arbitration Court awarded it about 18.2 trillion roubles, roughly $250bn, a ruling the central bank said recognised Euroclear's actions as "unlawful". Euroclear said the claim had "no merit" and that its operations were unaffected; Russian judgments have no obvious route to enforcement inside the EU. The dispute matters for Ukraine's budget because it raises the legal and political price of the only source of finance large enough to close a $32.6bn gap in a single decision.

Talks do not change the 2027 arithmetic

On 25 September Kyiv and Moscow both confirmed a United States proposal to restart trilateral talks at a technical level, with the United Arab Emirates suggested as the venue. Zelenskyy said Ukraine was awaiting a proposed date; the Kremlin spokesman, Dmitry Peskov, said a meeting "could take place soon". The same day, Russian strikes killed at least seven people in Kyiv. Even a durable ceasefire agreed this winter would not quickly shrink next year's budget. Ukraine would keep a large army under arms, reconstruction would add spending, and partners might be slower, not faster, to fund a state no longer fighting. The draft is written on the assumption that the war continues, and that is the prudent assumption for a finance ministry to make.

What to watch

Three things will decide whether the gap shrinks before the budget's second reading. The first is whether EU finance ministers agree to front-load the €90bn loan and, separately, whether the asset-based proposal gains enough support to overcome the objections that stopped it last December. The second is the IMF's next review, where a slower reform record could complicate the Fund's financing assurances from other creditors. The third is revenue: the UAH 117.3bn tied to unpassed tax changes is small against the gap, but a Rada that will not pass revenue measures makes partners less willing to fill the rest. Until the uncovered $32.6bn is matched by named commitments, the budget's spending lines, social and military alike, are provisional.

Sources

• Cabinet of Ministers of Ukraine — Resilience for Development: Government approved the draft State Budget for 2027
• Kyiv Post — Ukraine's Draft 2027 State Budget Envisages UAH 1.67 Trillion Deficit, KSE Institute Says
• Interfax-Ukraine — Ukraine faces worst budget outlook since 2022 as 2027 funding gap hits $32.6 bln
• Euronews — Brussels says €90 billion loan for Ukraine is enough for now amid growing doubts
• EEAS — Council finalises €90 billion support loan to Ukraine
• Interfax-Ukraine — IMF completes 1st review of EFF program for Ukraine, allocates $690 mln tranche
• The Moscow Times — Russian Court Orders Euroclear to Pay Around $250Bln Over Frozen Assets
• Al Jazeera — US seeks to revive Russia-Ukraine ceasefire talks as seven killed in Kyiv