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Ukraine faces $7 billion defense crisis despite aid surplus
Ukraine races against an October deadline to secure emergency military funding while international partners debate whether aid restrictions designed to prevent corruption now undermine the war effort itself.
Ekonomichna Pravda (EP) reports that Ukrainian policymakers have three weeks to secure 300 billion hryvnias ($7 billion) in additional defense funding or face military salary disruptions starting in November. This is despite having $6-7 billion in unused civilian aid sitting in government accounts.
The funding gap exposes how current Western aid frameworks create unintended consequences, forcing Ukrainian officials into urgent negotiations with international partners about relaxing restrictions prohibiting financial assistance for military purposes—a policy debate that could reshape how democracies fund wartime allies, according to EP’s analysis.
Ukraine seeks access to frozen Russian assets
EP highlights that Ukrainian officials are now pressing Western partners to lift restrictions on at least portions of financial aid for military use.
The most promising target is the European Union’s share of the Extraordinary Revenue Acceleration for Ukraine or ERA Loans program—a $50 billion G7 credit secured by frozen Russian assets.
While Britain’s portion of approximately $3 billion already allows weapons purchases, Ukraine seeks access to the EU’s roughly $20 billion share for military purposes, EP reports.
Such a change would ease the funding crisis while ending the current system where civilian programs receive surplus funding as military operations face shortfalls.
Time pressure mounts as military salaries are at risk
Without parliamentary approval of budget changes by the end of the month, EP warns that Ukraine will face potential military salary disruptions starting in November.
The Ministry of Finance has already reduced domestic bond placements to preserve borrowing capacity for emergency use, while exploring internal budget reallocations.
However, EP notes that parliamentary rejection of proposals to expand government reallocation powers means any major budget shifts require legislative approval—creating democratic accountability while complicating rapid military funding.
The two-budget paradox strains war financing
Ukraine effectively operates separate defense and civilian budgets due to Western aid restrictions.
While international partners have provided $144.7 billion since Russia’s invasion, these funds cannot support military operations, creating structural imbalances even when aid arrives in surplus amounts.
According to EP, the Ministry of Finance reports that Ukraine attracted $29.5 billion from partners in 2025, while civilian expenditures totaled approximately 900 billion hryvnias ($21 billion).
This leaves $6–7 billion in unused foreign funds, explaining Prime Minister Yulia Svyrydenko’s government’s continued launch of new programs, including expanded “National Cashback” funding—a program that reimburses households for part of their utility spending and also rewards purchases of Ukrainian-made products—and grants for entrepreneurs.
Meanwhile, EP reports that defense requirements consume nearly all domestic tax revenue, yet still fall short by hundreds of billions of hryvnias.
Multiple pressures drive defense spending surge
EP reports that Ukraine increased defense spending by 400 billion hryvnias ($9.7 billion) in July, but officials immediately understood this would not suffice.
According to EP’s government sources, the current 300 billion hryvnia ($7.3 billion) gap stems from several factors.
Key drivers include accelerated weapons purchases after Donald Trump’s election, when Ukraine’s National Security and Defense Council decided to boost ammunition procurement following signals about potential US supply disruptions.
Officials also cite increased one-time death benefits of 15 million hryvnias ($36 480) per fallen soldier, with recent prisoner exchanges returning hundreds of bodies and triggering massive benefit payouts.
Western partners face policy adjustment pressure
The crisis, as outlined by EP, illustrates broader challenges facing Western aid frameworks: balancing oversight requirements with wartime urgency, as Ukrainian officials argue for policy adjustments that better match aid structures to battlefield realities.
According to EP, current restrictions were designed to prevent corruption and ensure humanitarian needs remained funded.
Still, they now create situations where partner nations must navigate complex funding streams while facing urgent military requirements.
The debate reveals broader questions about aid architecture for wartime allies, EP concludes, as democracies must balance accountability with the flexibility that active combat operations demand.
