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their temporary residency permits and send them home have been rebuffed
by the EU member states, who are keen to retain this pool of cheap labour that has in many cases boosted economic growth. Kyiv even ordered its consulates in EU countries to stop renewing expired passports in an effort to force the men to go home, but countries such as Poland ruled that these men could remain without valid documents.
Anecdotal evidence of press gangs operating all around Ukraine, snatching military-aged men from the streets, suggests that the campaign is not
going well. While Russia has enough fresh meat for the grinder to sustain
a kill ratio of six to one, if Ukraine’s recruitment is failing to add many new soldiers than that one soldier it loses, according to Zelenskiy, it will see the size of its army slowly shrink.
The strength of the AFU and the outlook for replenishing the ranks in 2025 will be another important factor going into Zelenskiy’s autumn calculation.
The lack of money
The final factor is money. The war is costing about $100bn a year to perpetrate, the bulk of which is supplied by Ukraine’s donors, who are becoming increasingly reluctant to underwrite the bill.
There are four major funding packages in place – US’ $61bn support package, EU’s four-year €50bn support package, $50bn loan deal serviced by the profits
from the CBR’s frozen assets and
a $40bn Nato-backed facility – but all of them have some problems.
Ukraine remains desperately short
of money and the last two support tranches from the US and EU are widely seen as the last two big packages Ukraine will receive.
Funding the budget: The talk of “stand with Ukraine” is big, but when it comes to transferring money to Kyiv, the
West walks slowly. Ukraine received “minimal military assistance” from its partners in the first quarter of this year, receiving only 10% of what was planned, according to Kyiv School of Economics (KSE) latest macroeconomic digest.
That left the budget with a $5.2bn deficit as international grants received in the period fell to $0.9bn compared to $3.7bn received in the first quarter
a year earlier. That left MinFin rooting around for extra money and tapping both the banking sector’s profits and the National Bank of Ukraine (NBU) for cash, as well as making some cuts or delaying payments.
The state budget has received $20.2bn in revenue so far this year, mostly
from international partners ($13.8bn) and domestic state loan bond (OVDP) issuance ($6.4bn). The largest donors were: EU with $8.5bn, Japan with $2.1bn, Canada with $1.5bn and the IMF with $881mn. Since the beginning of the full-scale invasion Ukraine has received
more than $87.4bn in international aid and generated more than $29bn from the issuance of high-yielding OVDPs.
But even with all these billions in
aid, MinFin is struggling to cover its budgetary needs – and that aid is almost bound to fall after this year.
For the second year in a row, the country's government faces a record deficit of a whopping $43.9bn and is counting on covering the bulk of it with help from Western partners. However, this year
it is only expecting just under $38bn in funding from its international partners. The difference is going to be made up through tax hikes and spending cuts.
Ukraine is burning through around $40bn a year to fight Russia. In the first five months of this year the country spent $18bn on military needs, which amounted to almost 60% of all budget expenditures. The international support packages look big, but most of the $61bn US package will go to replenishing its own arsenal or arms makers at home to make more weapons for Ukraine’s use. Only $8bn of America’s recent package will go directly to Kyiv to fund Ukraine’s budget. The same is true of the EU €50bn money, which is spread over four years, and a lot of that is earmarked for weapons.
And the amount coming from donors is expected to fall drastically in the next few years. According to Rada budget committee member Yaroslav Zheleznyak’s Telegram channel, the
Structure of budget revenues in Q1 2023-2024, $bn Structure of budget expenditures in 2023-2024, $bn
Source: Ministry of Finance of Ukraine, Openbudget.
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