Ukraine Faces $27 Billion Defense Funding Gap as Russia Intensifies Attacks

KYIV — Vladimir Putin is intensifying Russia’s pressure on Ukraine, smashing cities, factories, bridges and ports with constant waves of killer drones and missiles.

Short on interceptors, Kyiv is having difficulty knocking down Russia’s increasing number of jet-powered drones — and Ukraine’s problems don’t end there.

Prime Minister Sergii Koretskyi warned journalists this week that Ukraine faces a $27 billion defense funding gap this year, with Kyiv hoping to cover about $7 billion domestically and looking to partners for the rest. Some EU financing remains tied to reforms Kyiv must pass to unlock the money, while other allies have yet to fill the remaining gap.

Overnight, Russia launched more than 190 missiles and drones in a nationwide assault that heavily targeted energy infrastructure, causing blackouts in Kyiv.

“Since the summer, there has been virtually not a single day when the enemy has not attacked energy infrastructure. But an attack of this scale and intensity has not occurred since the end of the last heating season,” Koretskyi said Wednesday.

Following the attack, Ukrainian President Volodymyr Zelenskyy renewed his call for allies to send more air defenses. “Every interceptor missile truly saves lives,” he said. “And the closer we get to winter, the more of this protection we need. We must do everything we can to ensure that Russia’s strategy of ballistic and drone terror does not succeed.”

Russia, in recent weeks, has escalated near-continuous drone and missile attacks. Air raid alerts are relentless — day and night — in Kyiv. The strikes have hit railways, energy plants, ports, factories and other critical infrastructure across the country, hammering Ukraine’s economy and adding to pressure on public finances. The government is also considering tax increases as it looks for domestic methods to close part of the defense gap.

“Of course, raising taxes is never ideal, but in wartime, we cannot afford the luxury of populism or pretend we can avoid asking anything of the public,” said Oleksandra Myronenko, an economist with the Center for Economic Strategy think tank.

Without money, Ukraine’s ability to continue resisting Russia would be undermined, Koretskyi warned. Kyiv needs cash now to place advance orders for weapons and ammunition due next year.

“This applies particularly to long-range drones — our ability to carry the war back to where it came from. This is a critical need that needs to be fulfilled,” he said.

Koretskyi told reporters that Kyiv will have to shift spending to keep the country fighting and basic government services functioning.

“This entails a strict regime of public finance austerity and the deferral of certain non-priority expenditures. These funds are intended to ensure payments to military personnel and support for their families,” Koretskyi said. “First and foremost, we are financing: defense, pensions and social payments, as well as salaries for teachers, doctors and other budget employees.”

Zelenskyy underlined this week that his administration’s “clear task” is to “meet Ukraine’s current defense funding needs. Everything we can do together with our partners, using their funding — and this applies first and foremost to defense orders — must be 100% complete by the end of the year.”

Russia also feels the pain

Ukraine is not alone in feeling the financial strain. Moscow is also being forced to absorb rising fiscal costs — but its larger economy and ability to raise taxes give it more room to sustain the war.

The federal budget deficit reached 5.8 trillion rubles (€60.4 billion) in the first half of the year, which is being financed by a host of tax increases. Russia plans to spend 17.1 trillion rubles (€180 billion) on defense in 2027, Reuters reported, a 27 percent increase on what it had previously budgeted for that year and accounting for more than a third of all budget spending.

The Kremlin has lowered its estimates for oil and gas revenue for next year; Ukraine’s ongoing bombing campaign against refineries and energy infrastructure has wrought havoc with production.

The Russian military has suffered more than 1.5 million casualties in the war, according to Ukrainian estimates. Russian President Vladimir Putin this week raised the authorized size of the armed forces to about 2.4 million personnel, the fourth expansion since the full-scale invasion began in February 2022.

Despite the cash crunch, Ukraine is still able to exert a painful toll on Russia.

Ukraine’s army reported last week that its ongoing Operation Vivaldi had pushed Russian forces back in part of the eastern front and captured more than 250 prisoners. Kyiv is also investing heavily in domestic long-range missiles and drones to strike targets inside Russia.

Europe under pressure to pay up

But Ukraine needs money to fund that war effort.

That’s putting pressure on European allies, which supply the bulk of Kyiv’s weapons and finances after the U.S. ended most new aid when Donald Trump returned to the White House last year.

The EU is currently paying out installments on its two-year €90 billion loan to Ukraine, but Kyiv is asking for the money to come faster to fill the budget gap. “The funds are needed this fall … especially given the mobilization that the enemy is planning right now,” Defense Minister Evgeniy Khmara urged this week.

But before releasing more funds, Brussels wants Ukraine’s parliament, the Verkhovna Rada, to complete crucial reforms that are part of the country’s roadmap to eventual EU membership.

“As reforms in the Rada progress, more budget support too. We have €37 billion still available in this calendar year,” European Commission President Ursula von der Leyen wrote after meeting Zelenskyy at the U.N. General Assembly earlier this month.

Kyiv, for its part, is also putting pressure on Brussels to revisit the more than €200 billion in Russian central-bank assets immobilized across the EU. “We need our friends, our European politicians, to be brave enough and to make some bold actions,” said Ukrainian Finance Minister Serhii Marchenko.

Next year looks even more fraught.

Marchenko told donors in Brussels this week that Ukraine would require $52.6 billion in aid in 2027, while about $32.6 billion remains unfunded.

“Ukraine has no reserve funds to cover its entire spending. If we fail to get external financing, we’re facing a strong cut of all non-priority expenditures — and could even extend to protected expenditures,” said Myronenko, the economist.

“If we don’t have the actual cash in our accounts, we won’t have the means to pay military salaries, pensions, and so on. So, if there is no international aid, then everything will be very bad,” she added.