Ukraine Faces $56 Billion Budget Gap as War Costs Soar

Ukraine is confronting a deepening budget crisis as Russian attacks cripple major industries, reduce tax revenues and drive the cost of fighting the war sharply higher.

Kryvyi Rih, the hometown of President Volodymyr Zelenskiy, highlights the economic strain. Russian missile strikes have halted operations at ArcelorMittal’s major steel and mining complex, the city’s largest employer. Mayor Oleksandr Vilkul said the industrial city of about 600,000 people is focused on keeping hospitals, schools and public transportation operating.

The disruption extends across Ukraine’s steel sector, which generated roughly 10% of economic output before Russia’s full-scale invasion in 2022. Attacks on factories, warehouses, ports and railways have weakened businesses, exports and government revenue.

Ukraine now needs about $56 billion to cover its budget shortfall this year, equivalent to roughly a quarter of economic output. Around $27 billion of that gap relates to military spending.

The daily cost of fighting has climbed from about $140 million two years ago to $190 million, according to parliament budget committee head Roksolana Pidlasa. Ukraine spent more than $44 billion on defence during the first nine months of the year while collecting only about $42 billion in tax revenue.

Russian attacks cost the budget more than 49.5 billion hryvnias ($1.1 billion) in lost tax revenue during that period, with losses potentially reaching 70 billion hryvnias by year-end.

Ukraine’s agricultural sector is also under pressure. Grain exports fell 36.6% year-on-year in September following Russian attacks on Black Sea ports, while Economy Minister Oleksandr Kravchenko warned that about $40 billion in export revenue could be at risk.

Foreign financing remains crucial. Ukraine has received nearly $200 billion in fiscal assistance from Western partners since the invasion, but $29.5 billion in aid is currently at risk because required tax and anti-corruption reforms have been delayed.

For next year, Kyiv has proposed record defence spending of $110 billion, while Finance Minister Sergii Marchenko estimates an unfunded budget gap exceeding $32 billion. Ukraine is pushing Europe to use roughly €210 billion in frozen Russian central bank assets to help finance its growing wartime needs.