Ukraine’s needs and funding sources: budget review 2023

Since the war has become protracted, and Russia shows no signs of willingness to retreat, Ukraine needs to seek sustainable sources of funding to finance victory. Despite the resilience of Ukraine and its people, the war is gradually suppressing the economy, taking the lives of soldiers and civilians, and causing long-term consequences for all aspects of life in the country every day.

To deliver a final repulse to the aggressor, the military effort needs to be funded. While “civilian” expenses are primarily funded from existing donor support, budget funds, and current levels of military aid, these only suffice to maintain defensive efforts at the current level. The situation in public finances in 2023 can serve as a benchmark for assessing Ukraine’s needs — and sufficient for only supporting of the “status quo.”

We have collected data on budget execution at various levels to understand the situation in “broad” public finances — in the general government sector (DGS)—meaning budgets at all levels, including social funds, but not considering state-owned enterprises. The analysis below shows that Ukraine needs significant additional help in funding defence needs to win.

In 2023, amid macroeconomic stabilisation, Ukraine’s budget policy continued to be determined by military challenges – more than half of all budget expenditures, in fact, the entire pre-war budget of Ukraine, is now directed to defence. And only thanks to international partners, Ukraine can afford to finance expenditures for all the rest of the state functions for the second year in a row. About $60 billion was poured into the 2023 budget through net foreign borrowing, grants and direct aid as part of the budget entities’ own revenues.

In total, an amount equivalent to $135 billion or 75% of annual GDP passed through the budget of the general government sector. Half of these funds were allocated to defence.

More in the attached report attached.