A shift in the expected end of the war to the second half of 2027 would lead to higher defense spending and create an additional $67.4 billion financing gap in Ukraine’s state budget for 2027–2029, according to a report by the KSE Institute.
“A longer full-scale war would significantly increase defense and security spending, constrain budget revenues and delay access to market financing,” the Institute said in its macroeconomic review for the third quarter of 2026.
Total defense and security spending over this period is projected to increase by $68 billion compared with previous estimates, reaching $101.5 billion in 2026 and $112.9 billion in 2027. To preserve debt sustainability, additional financing would need to come in the form of grants or concessional loans.
The report notes that the budget deficit, excluding grants, is expected to amount to 19.1% of GDP in 2026, 18.8% in 2027, 17.8% in 2028 and 12.6% in 2029. While no budget financing gap is expected in 2026 — with an estimated $4 billion in excess financing — the gap is projected to reach $19.51 billion in 2027, $27.1 billion in 2028 and $20.7 billion in 2029.
The external financing gap is estimated at $16.2 billion in 2026 and is expected to narrow to $2 billion in 2027. A surplus of $10.6 billion is projected for 2028, followed by a $4 billion gap in 2029.
Gross international reserves are expected to stand at $73.5 billion at the end of 2026, $75.5 billion in 2027, $65 billion in 2028 and $68.9 billion in 2029.
