The state budget deficit limit for 2026 has been increased by nearly 6 billion hryvnias
On the other, the government is attempting to demonstrate its commitment to reforms to European partners by passing integration-related laws in exchange for tranches, while simultaneously seeking alternative capital sources through large-scale regional investment platforms.
War budget and deficit realities
The state budget law for 2026 passed by the Verkhovna Rada clearly illustrates the financial strain the country is under. 257 people’s deputies voted for the document in the second reading and in its entirety. The country’s main financial plan is based on a scenario assuming that hostilities will continue throughout all of 2026. Budget revenues are set at 2 trillion 918 billion hryvnias, while expenditures reach a staggering 4 trillion 781 billion hryvnias.
As announced by Minister of Finance of Ukraine Serhiy Marchenko, the maximum state budget deficit was increased by nearly 6 billion hryvnias to 1.9 trillion hryvnias, accounting for 18.5% of GDP. The lion’s share of spending is traditionally directed toward the security and defense sector — 2 trillion 806 billion hryvnias. According to the head of the Ministry of Finance, to cover financial gaps, Ukraine needs to attract an additional $45 billion from international partners in 2026. Furthermore, the delay in passing the budget, which sparked discussions among deputies, threatened the stability of relations with the IMF, as the fund expected the vote to take place no later than December 2.
The Ukraine Plan and 800 million from Europe
In parallel with budgetary battles, parliament took a step toward European funds under the Ukraine Facility program. Deputies supported in the first reading a package of bills whose adoption is a prerequisite for attracting approximately 800 million euros in financial support from the European Union. As noted by the Ministry of Economy of Ukraine, these legislative initiatives are aimed at meeting structural indicators planned for 2026.
The reform package appears pragmatic and covers areas where European auditors demand the greatest transparency. In particular, bill No. 16013 strengthens penalties for payment fraud, while project No. 15024 proposes simplified bankruptcy procedures for small businesses. Additionally, document No. 15352 introduces digital traceability for timber to ensure free access to the EU market, and bill No. 14282 aims to protect the independence of the NEURC from political influence. Minister of Economy and Environment of Ukraine Oleksandr Kravchenko emphasized that, in total, the government must meet 36 indicators to receive 13.1 billion euros in European aid by the end of the year.
Carpathian billions as an alternative path
Realizing that Western budgetary aid is becoming increasingly conditional and politically sensitive, Ukrainian authorities are attempting to activate direct investment ties. An example of such pragmatic diplomacy was the international Carpathian 8 summit held in the Precarpathian region. The event brought together about 1,400 delegates from 25 countries, including leaders of Carpathian region states, whose combined GDP reaches $3.5 trillion.
Following the summit, participants formed a massive investment portfolio of nearly 100 projects worth over 40 billion euros, 55 of which belong to Ukraine. As Minister Oleksandr Kravchenko reported, specific financial and trade agreements worth over 1 billion euros were already reached during the event. Nearly half of the signed agreements concern the energy sector, which is critically important amid the wartime destruction of power generation. Furthermore, investment agencies from participating countries created a special Carpathian Investment Coalition designed to simplify access to EU financial resources.
Thus, the state’s financial strategy for 2026 is built on three pillars: a rigid war budget with a massive deficit, systemic reforms in exchange for direct macro-financial support from Brussels, and attempts to attract private capital through cross-border investment platforms. Whether these efforts will suffice to cover the “budget hole” in the face of a protracted war remains to be seen, depending on the real speed of adopting European integration laws.
Illustrative photo: Misha Reme / CC BY-SA 4.0
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