Ukraine’s budget outlook for the coming years is under scrutiny after the International Monetary Fund (IMF) estimated that the country’s financing needs for 2026 and 2027 could be up to $20 billion higher than projections made by Kyiv.
The gap in forecasts emerged during a week-long IMF mission to Kyiv, which focused on external financing as Ukraine prepares to request a fresh loan programme.
With the war against Russia extending into its fourth year and no sign of resolution, the talks highlight the challenge of sustaining military and economic stability while international support evolves.
IMF and Kyiv projections diverge on funding estimates
The Ukrainian government has maintained that it requires $37.5 billion over two years to meet its expenditure needs. However, IMF staff estimate that the figure may be between $10 billion and $20 billion higher.
Reconciling these numbers is necessary before discussions move forward on approving a new loan programme, as the IMF’s current $15.5 billion package will expire in 2027.
Most of the funds from that existing package have already been disbursed. The programme was initially structured with the assumption that the war would end in 2024.
Ukraine’s Prime Minister Yuliia Svyrydenko is aiming to secure approval for a replacement package by the IMF’s board before the end of the year.
Reliance on western allies and shifting donor support
Once a figure is agreed with the IMF, both sides will approach Ukraine’s international partners to mobilise additional financing. This may prove difficult given changes in donor dynamics.
The United States, once Kyiv’s biggest financial backer in the early stages of the full-scale invasion, has scaled back contributions since Donald Trump returned to the White House. As a result, the European Union has become the largest provider of aid.
Despite this, Ukraine faces obstacles in raising the necessary sums.
With military spending remaining a critical and unpredictable budget item, the IMF has emphasised the need for accurate verification of soldier payments, amid concerns that some recipients may be ineligible for maximum payouts.
Conditions tied to IMF support
The IMF has been Ukraine’s third-largest creditor during the war, but its assistance comes with conditions. Discussions have focused on expenditure controls and economic reforms.
While the lender has encouraged Ukraine to increase tax revenue, Kyiv remains reluctant to raise the burden on a population already worn down by conflict.
Instead, the IMF is expected to push for measures aimed at shrinking the shadow economy, which Ukraine’s government estimates accounts for more than 30% of GDP.
This, the IMF argues, could create a more sustainable revenue stream without placing additional pressure on households.
Next steps for aid negotiations
Ukraine’s Finance Ministry has confirmed that discussions with IMF staff have concluded for now and that talks will continue in the coming weeks.
The cabinet, along with the IMF, is expected to present a revised figure for external financing needs as early as next week. Once an agreement is reached, outreach to allies will begin to secure commitments to close the gap.
The IMF has declined to comment publicly on the ongoing consultations, while Ukraine’s Finance Ministry has stressed its intention to maintain close dialogue.
The eventual outcome will be critical for Kyiv, which faces the dual challenge of funding military operations while ensuring broader economic stability.
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