Ukraine for the first time unable to cover military expenses from domestic sources

Ukraine has for the first time since the start of the full-scale invasion found itself unable to cover its own defense spending from domestic resources.

Ukrainian officials issued this warning at the 22nd Yalta European Strategy (YES) conference in Kyiv.

The country faces a “very harsh winter” amid unrelenting Russian strikes on infrastructure and a deepening budget crisis.

Economy Minister Oleksandr Kravchenko, speaking at the conference on Saturday, said damage from Russian air strikes on infrastructure and fixed assets is estimated at nearly €8.6 billion this year alone. Total economic losses — including the effective blockade of Black Sea ports — amounted to around 1.5 percentage points of GDP.

The financial picture painted by Ukrainian officials was bleak. Parliamentary budget committee chair Roksolana Pidlasa said daily war expenditures have risen to approximately €163.9 million, compared to $140 million in 2024. The increase is driven by inflation, a larger troop count, growing social payments to the families of fallen soldiers, and higher ammunition consumption.

In the first eight months of 2026, Ukraine spent approximately €36.2 billion on defense, not counting military aid in kind. However, domestic revenues and local borrowing over the same period yielded only around €33.6 billion.

“Unfortunately, this year the war is so costly that we cannot cover even our share of the expenses,” Pidlasa said, adding that international funds are now being used to pay military salaries — a line Ukraine had previously managed not to cross.

Ports blocked, revenues falling

According to Kravchenko, Russia has effectively blockaded Ukraine’s Black Sea ports by intensifying air attacks on the country’s southern regions. This puts approximately €34.5 billion in export revenues at risk. Ukraine’s main export categories — agricultural products, ferrous metals, and steel — are directly dependent on these sea routes.

State budget revenues for the first eight months of 2026 came in approximately €1.2 billion below planned targets, with a quarter of those losses falling in August — a month of particularly intense strikes, Pidlasa said. For more than two weeks, Russia has been conducting near-continuous attacks on Kyiv using high-speed jet drones, disrupting government operations and business activity.

In search of solutions

Ukrainian Prime Minister Serhiy Koretsky told the conference that the government would use the World Bank’s Special Ukraine Recovery Program to support businesses affected by the strikes. Officials are also in talks with European partners about additional financing, including through frozen Russian assets, but no quick solution has yet been found.

President Volodymyr Zelensky, speaking on Friday, directed a warning to Moscow:

“Russia knows that if it strikes our energy system in winter, Russia will get the same in return.”