Ukraine faces $27 billion defense budget deficit, seeks EU and IMF support

Why it matters

A $27 billion gap in Ukraine's defense budget threatens the country's ability to fund drones, missiles, and troop support for the final months of this year and the first quarter of 2027. Closing the deficit requires coordination between domestic redistribution within existing programs and external financial support, particularly from the EU, including an early release of the second tranche of a €90 billion credit. Zelensky warned that without funding decisions and drone prepayments in October and November, Ukraine will face serious challenges supplying weapons in January and February.

What happened

President Zelensky stated on September 25 that Ukraine's defense budget has a $27 billion deficit for the current year. The figure mainly covers drones and missiles, as well as partial military pay, for October, November and December, with roughly one-third earmarked for drone purchases intended for January, February and March of next year. Zelensky said the government team will work out a mechanism to cover the deficit in the near future, including by redistributing funds within existing programs, and handed the financing structure to the prime minister and the finance minister.

The same day, Prime Minister Serhiy Koretsky held a meeting with the Ministry of Defense on closing the additional $27 billion defense request. He said part of the sum must be covered from internal sources by redistributing funds within existing programs, a task assigned to the Ministry of Finance, and that the government is counting on EU support. He also noted that defence ministries are conducting direct negotiations with NATO countries and other partners, and that part of the resources is needed immediately for prepayments on supplies expected in the first quarter of 2027.

Zelensky said he had discussed the financing need with the EU, European Commission President Ursula von der Leyen, and IMF Managing Director Kristalina Georgieva, receiving a positive and constructive reaction. He asked the European Commission to bring forward the second tranche of a €90 billion credit so that January and February can be supplied with appropriate drones and missiles. He added that the IMF is not involved in direct military procurement financing. Part of the financing could also be arranged in a 'drone deal' format, Zelensky said.

Earlier in September, the Verkhovna Rada Budget Committee reported a 33.1 billion UAH revenue shortfall for January–August. On September 4, Finance Minister Serhiy Marchenko said Ukraine had not faced such a tense budget situation since the start of Russia's full-scale invasion in 2022. Ukraine expects to receive $29.5 billion from international partners.

How Ukrainian sources describe it

Ukrainian-language outlets centered the domestic political and budgetary response, prominently featuring statements by Prime Minister Koretsky and President Zelensky and the response of Foreign Minister Sybiha. Coverage focused on how the government plans to redistribute funds within existing programs, engage with the EU and IMF, and coordinate with the Verkhovna Rada to adopt required legislation. Ukrainian sources presented a unified official position that the Zelensky–von der Leyen conversation was friendly and constructive, rebutting the Bloomberg characterization.

How international sources describe it

One Bloomberg source described the September 23 conversation between Zelensky and European Commission President Ursula von der Leyen as tense. EU representatives told the Ukrainian side that before providing additional funds, partners want to see progress in implementing new Ukrainian legislation against the shadow economy, increasing tax revenues, and advancing alignment of Ukrainian legislation with EU norms. According to Suspilne, European Commissioners Valdis Dombrovskis and Marta Kos sent a letter to MPs listing laws Ukraine must adopt to receive already-agreed EU funding. IMF Managing Director Kristalina Georgieva, in a meeting with Zelensky, called on him to continue reforms in order to receive financial assistance.

Where reporting differs

A Bloomberg source characterized the September 23 conversation between Zelensky and European Commission President Ursula von der Leyen as tense; Foreign Minister Andriy Sybiha rejected this characterization, calling such reports fabrications and describing the conversation as friendly and constructive. Separately, the origin of the $27 billion figure itself is disputed: Zelensky cites it as established, while former Defence Minister Mykhailo Fedorov said he does not know where the figure came from.

Background

Prime Minister Serhiy Koretsky had been warning about the budget situation in the weeks before September 25. On September 1, he announced in the Verkhovna Rada a regime of strict economy for non-defense expenditures and reported 70 billion UAH in identified savings. On September 14, he said the situation with Ukraine's state finances was approaching critical and that delays in adopting required bills could jeopardize receiving $29.5 billion in international aid. On September 4, Finance Minister Serhiy Marchenko said Ukraine had not faced such a tense budget situation since the start of Russia's full-scale invasion in 2022. As of September 15, European Commissioners had sent a letter to MPs listing the laws Ukraine must adopt to obtain EU funding; according to lawmaker Yaroslav Zheleznyak, the Verkhovna Rada must adopt 40 draft laws by year's end.