Ukraine's government submits 2027 draft budget to parliament: defense at 44% of GDP, $52.6 billion external financing required

Why it matters

The 2027 draft locks in defense as the dominant fiscal priority at nearly 44% of GDP, with about 66.8% of all expenditures going to defense and security. Even as the headline defense number rises, the budget does not raise servicemember pay for a fifth year in a row — a politically sensitive gap between nominal military spending and frontline compensation that MP Yaroslav Zheleznyak flagged as his top budget-process priority. Execution depends on external support: $52.6 billion is required for 2027, but only $20 billion has been confirmed, leaving a $32.6 billion gap and tying the budget to IMF and EU conditions. Prime Minister Koretsky has warned that delays in adopting related bills could cost Ukraine $29.5 billion in international assistance. On the revenue side, over 131 billion hryvnias depends on parliamentary approval of tax changes including a +1 percentage point VAT rate (20% to 21%) and a +4 percentage point fuel excise increase, while the draft also plans 544.4 billion hryvnias in domestic OVDP borrowing and projects state debt above 12.3 trillion hryvnias by year-end — together signaling a sharp deterioration in fiscal sustainability.

What happened

On the evening of September 15, 2026, Ukraine's Cabinet of Ministers approved and submitted to the Verkhovna Rada the draft State Budget for 2027, registered as bill No. 16000. The Verkhovna Rada began its consideration the following day, September 16; MPs may submit amendments until October 1, with a first-reading vote expected at the end of October.

The draft projects revenues of 5 trillion 648 billion hryvnias (+8.7% vs. the 2026 plan) and expenditures of 7 trillion 272 billion hryvnias (+13.5%), giving total state outlays including lending and debt repayment of more than 8 trillion hryvnias — roughly four times the pre-full-scale-invasion level. Own revenues without grants are forecast at 3.2 trillion hryvnias (+265.9 billion vs. 2026), driven mainly by VAT (+167.2 billion), personal income tax (+106 billion), and excises (+48.7 billion). The National Bank will transfer only 48.7 billion hryvnias to the budget in 2027, about a third of the record 146.1 billion hryvnias transfer in 2026.

Defense and security receive 4 trillion 885 billion hryvnias, about 43.8–44% of GDP and roughly 66.8% of all expenditures, up 517.9 billion hryvnias (+11.9%) versus the 2026 plan. Within that envelope, 1.8 trillion hryvnias is earmarked for military salaries (+337.5 billion), 2.3 trillion hryvnias for armaments and military equipment (+1.4 billion), 264.9 billion hryvnias in reserve (200 billion from the general fund plus 64.9 billion from expected 'de-shadowing' customs receipts), 30 billion hryvnias in state guarantees for armaments, and 499.9 billion hryvnias for other expenditures (+127.7 billion). Some 1.73 trillion hryvnias (35.7% of defense and security) consists of targeted European funds for weapons and equipment, recorded in the special fund and possibly delivered in kind. Prime Minister Serhiy Koretsky said partners are expected to provide at least another 1 trillion hryvnias in material-technical military aid (missiles, weapons, equipment, ammunition) in 2027, more than in 2026.

Social and human-capital spending is also raised: education 328.5 billion hryvnias (+50.8 billion), with the average monthly salary of an experienced teacher planned to reach 27,300 hryvnias, a 65% increase versus 2025; healthcare 292.5 billion hryvnias, including 225 billion for the Program of Medical Guarantees (+33.5 billion), with target average salaries of at least 30,000 hryvnias for specialized-care doctors and 20,000 for nurses; social payments and Ministry of Social Policy measures 540.3 billion hryvnias (+72.6 billion), including 292.8 billion for pension supplements; veteran policy 20.5 billion hryvnias, of which 12.2 billion for veterans' reintegration; IDP support 83.2 billion hryvnias (+11.6 billion); and housing policy 84.9 billion hryvnias (+38.3 billion), including 45 billion for 'eOselya.' From January 1, 2027 the minimum wage is to rise from 8,647 to 9,546 hryvnias per month (+10.4%) and the general subsistence minimum from 3,209 to 3,559 hryvnias.

Business-support programs are nearly doubled to 96 billion hryvnias, including 29 billion for the '5-7-9%' lending program, 45 billion for 'eOselya,' 10.1 billion for the Innovation Development Fund, and 9.4 billion for other programs; an additional 58.7 billion hryvnias is earmarked for war-risk insurance for businesses, and 8.3 billion hryvnias to protect the fuel sector. Among the financing options being considered are a rise in the standard VAT rate from 20% to 21% and an increase in fuel excise.

Debt service is projected at 474.1 billion hryvnias (down 39.1 billion vs. 2026), and the state debt by the end of 2027 may exceed 12.3 trillion hryvnias. The budget retains funding for the 'National Cashback' program and the 'Yedyni Novyny' telethon. The draft would direct confiscated funds from BEB, NABU and SBI cases, ARMA assets, fines from the State Audit Service and the Antimonopoly Committee, and weapons-export permit fees toward weapons procurement; redirect the 5 billion hryvnium Unemployment Fund balance to pensions; and obligate the city of Kyiv to repay a 332 million hryvnium debt to the state from 2015.

How Ukrainian sources describe it

Ukrainian reporting, drawn exclusively from domestic outlets, centers on the budget's passage through the Verkhovna Rada and on the political tension between rising nominal defense spending and the absence of a military pay raise. PM Serhiy Koretsky frames the document as 'a budget of a country at war,' while MP Yaroslav Zheleznyak argues that the increase in Armed Forces funding only covers the 2026 shortfall and that soldiers' pay would not rise for a fifth consecutive year — calling it 'the greatest shame of Zelensky's budget policy' and his main priority in the budget process. Reporters detail proposed tax-side measures (a +1 pp VAT rate, +4 pp fuel excise), reallocations such as channeling confiscated and ARMA funds into arms procurement, the parliamentary calendar (amendments until October 1, first-reading vote at the end of October), and the fiscal backdrop: Finance Minister Serhiy Marchenko's warning of the most tense budget situation since 2022 and Defense Minister Yevheniy Khmara's reported $27 billion defense funding deficit. The framing emphasizes wartime sacrifice, donor reliance (the $32.6 billion financing gap), and the granular domestic policy trade-offs the Rada must now weigh.

Where reporting differs

Sources disagree on the exact date the draft first appeared on the parliamentary website: one outlet dates the bill card to August 15, while others consistently report bill No. 16000 as registered on the evening of September 15, 2026. Headline defense figures also vary across articles — 4 trillion 885 billion hryvnias for defense and security overall (about 44% of GDP) versus 1.02 trillion hryvnias specifically for Armed Forces maintenance — but these refer to different budget lines rather than a substantive contradiction, even though the framing is inconsistent across outlets.

Background

By the Budget Code, the government must submit the draft state budget for the next year to parliament by September 15; the 2027 draft met that deadline late on September 15, 2026. In the run-up to the submission, PM Serhiy Koretsky, Finance Minister Serhiy Marchenko (September 4), and Defense Minister Yevheniy Khmara (August 29) all publicly described Ukraine's fiscal situation as approaching critical, citing a reported $27 billion defense funding deficit and warning that delays in adopting related bills could jeopardize $29.5 billion in international assistance. In 2026 the government repeatedly amended the State Budget because of shortfalls in funds for military payments; MP Yaroslav Zheleznyak estimated the 2026 military pay deficit at 100–190 billion hryvnias, and in June 2026 the authorities added 1.56 trillion hryvnias to defense spending (over 1.45 trillion of it for military pay), with another 33.6 billion hryvnias redistributed for military payments in September. The 2027 draft retains funding for the 'National Cashback' program and the 'Yedyni Novyny' telethon, while the payroll fund for the judicial system grows by 44%, the State Bureau of Investigation by 19.9%, the prosecutor's office by 12.2%, and the overall state payroll fund by 18.2% — contrasts highlighted by critics in light of the absent military pay raise.