Ukraine suspends non-priority spending as PM warns of critical fiscal squeeze
Ukraine's Cabinet of Ministers approved a decision on 28 September prioritizing state expenditures toward defense, pensions, social payments and public-sector salaries, while suspending non-critical construction, reconstruction, capital repairs and beautification projects until the end of the war. Prime Minister Serhiy Koretsky said part of the pressure stems from delayed international financing, in part because Ukraine has not fulfilled some of its commitments to international partners. The government has identified about $7 billion through internal optimization against a reported $27 billion Ministry of Defense deficit.
Key points
- On 28 September, the Cabinet approved a decision prioritizing state expenditures amid a difficult fiscal situation.
- Priority funding goes to defense, pensions, social payments, and salaries for teachers, doctors and other budget-sector workers.
- Non-priority spending is suspended until the end of the war, including new construction, reconstruction, capital repairs not of critical importance, and beautification projects such as parks, squares, fountains and repaving of cobblestones.
- Prime Minister Serhiy Koretsky said part of the planned international financing has not arrived, including because Ukraine failed to meet some of its commitments to international partners.
- The Ministry of Defense faces a reported $27 billion deficit; the government says it has found about $7 billion through internal optimization.
- President Zelensky set a 15 October deadline for the government to fulfill its side of obligations and tasked the diplomatic and military apparatus with fully covering defense financial needs by year-end.
- The government submitted its sixth wartime budget to the Verkhovna Rada with expenditures above 8 trillion hryvnias against domestic resources of about 3.7 trillion hryvnias; of the $52.6 billion (roughly 2.3 trillion hryvnias) needed from partners, only $20 billion (864 billion hryvnias) has so far been confirmed.
Why it matters
The decision reorders Ukraine's wartime budget toward defense and protected social obligations and away from infrastructure, construction and beautification. It comes as the Ministry of Defense is reported to face a $27 billion deficit that the government says it has only partially been able to fill, with about $7 billion found through internal optimization. Prime Minister Koretsky publicly linked part of the financing crunch to Ukraine's failure to deliver on commitments to international partners, an unusual admission that could shape relations with donors. President Zelensky set a 15 October deadline for the government to fulfill its side of obligations and tasked the diplomatic and military apparatus with fully covering defense financial needs by year-end. The package also introduces fiscal austerity affecting local governments and signals potential new tax measures (VAT, excise) that still need parliamentary approval.
What happened
On 28 September, the Cabinet of Ministers approved a decision prioritizing state expenditures amid a difficult fiscal situation. Budget funds will be directed first to defense, pensions and social payments, and to salaries for teachers, doctors and other budget-sector workers. The Cabinet is suspending until the end of the war expenditures on new construction, reconstruction and capital repairs that are not of critical importance, as well as beautification projects such as parks, squares, fountains and the relaying of cobblestones. Prime Minister Serhiy Koretsky said part of the planned international financing has not yet arrived, in part because Ukraine failed to fulfill some of its commitments to international partners, and called on local self-government bodies to review their own budgets and limit non-priority spending. The Ministry of Defense is reported to face a $27 billion deficit; through strict economy and internal optimization, the government says it has found about $7 billion toward that gap. In his evening address, President Zelensky said he had met with the Prime Minister and the diplomatic team to discuss key priorities with partners, set a 15 October deadline for the government to meet its obligations, and called on parliament to provide a similarly clear schedule. Separately, the government has submitted to the Verkhovna Rada its sixth wartime budget, with expenditures above 8 trillion hryvnias against domestic resources of about 3.7 trillion hryvnias; of the $52.6 billion (roughly 2.3 trillion hryvnias) needed from partners, only $20 billion (864 billion hryvnias) has so far been confirmed.
How Ukrainian sources describe it
Ukrainian outlets frame the decision as a necessary and transparent prioritization in a wartime fiscal squeeze: protected categories (defense, pensions, social payments, public-sector salaries) are fully funded, while non-priority infrastructure and beautification are deferred rather than cancelled. Reporting emphasizes the prime minister's direct admission that part of the international financing gap is due to unfulfilled obligations to partners, and notes President Zelensky's October deadline for the government and the parallel demand on the Verkhovna Rada for a clear legislative schedule, alongside warnings that further delays could jeopardize tens of billions in external support.
Where reporting differs
One source (Novynarnya) attributes the statement prioritizing state expenditures to Prime Minister Denys Shmyhal, while all other sources and the prime minister's own communications name Serhiy Koretsky.
Background
Ukraine's pre-war state budget already featured a record deficit of about 1.9 trillion hryvnias (roughly 18.5% of GDP), with the security block absorbing more than half of spending. A 'strict economy' regime for non-defense expenditures was first announced on 1 September, and by 14 September the prime minister described public finances as approaching critical. The submitted sixth wartime budget envisages expenditures above 8 trillion hryvnias against domestic resources of roughly 3.7 trillion hryvnias, leaving a 4.3 trillion hryvnias gap to be covered by international assistance. European partners and the IMF are tying further funding to the implementation of agreed reforms, and EU commissioners have sent parliament a list of laws needed to unblock already-agreed financing. A new military remuneration system announced in June has not been launched because of a lack of funds, accounting for about 1 trillion hryvnias in unspent obligations. Independent reporting puts the cost of one day of war in 2026 at around $190 million, $50 million more than two years earlier.