Ukraine struggling to cover funding gap as war costs surge

The Ukrainian parliament building, amid Russia's attack on Ukraine, in Kyiv, Ukraine August 24, 2025. REUTERS/Gleb Garanich

KYIV, Sept 30 - Ukraine's total war costs will reach $155 billion this year and the government is struggling to close a $27 billion funding gap to ensure it can still conduct combat operations at the start of 2027, Prime Minister Sergii Koretskyi said on Wednesday.

Koretskyi said the government planned to cover $7 billion of the gap by postponing expenditure, reallocating money from other parts of the budget and cutting some costs, and was in talks with partners on how to cover the remaining $20 billion.

It is the first time Kyiv has released an estimate of its annual war costs, meaning there is no comparable figure for 2025, but officials have said that the cost of the conflict has risen as the use of missile and drone technology has increased.

The $155 billion figure covers both domestic state spending and off-budget military aid from Ukraine's Western allies, including air defence missiles, ammunition and aircraft delivered as hardware rather than cash.

Koretskyi said it was critical that Ukraine plugged the $27 billion gap in its 2026 military spending, as this would help to cover defence orders for the start of next year.

"Our ability to conduct active combat operations, including in the first quarter of 2027, depends on this funding. This applies to our long-range capabilities and our ability to take the war back to where it came from," Koretskyi said.

"This is a critical need that must be met."

With the war in its fifth year and costs of the war soaring, the conflict has partly morphed into an exhausting battle of financial endurance.

Ukraine's total budget revenues are targeted at about $70 billion this year and they are fully channeled for defence needs. The country depends on the military and financial support from its Western allies to be able to stay in the fight.

Russia plans to spend 17.1 trillion roubles ($202.58 billion) on defence in 2027, around 27% more than the 13.5 trillion roubles originally budgeted, and the highest figure since the start of its invasion in February 2022.

Ukraine is still finalizing its military spending plans for next year.

In 2026, Kyiv has struggled to receive foreign aid and financial support on time and in full due to delays with implementation of reforms, corruption scandals and squabbles between government and parliament over unpopular legislation.

Koretskyi said that $29.5 billion in foreign aid was at risk if Kyiv fails to meet its reform commitments with the IMF and the EU.

"The government is working as quickly as possible to fulfil all its obligations by 15 October," Koretskyi said. "This is critically important. It must be done as quickly as possible." REUTERS