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Ukraine's economic strategy amid prolonged conflict
Ukraine's Finance Minister Sergii Marchenko has emphasized the critical role of economic stability in securing the country's future, as it enters the fifth year of war with Russia. Speaking to The Meta Times, Marchenko outlined plans to transform Ukraine into a key contributor to European security and prosperity, leveraging the hard-won military expertise gained since Russia's full-scale invasion in 2022.
EU loan provides lifeline amid budget shortfall
The European Union has approved a €90 billion ($105 billion; £79 billion) loan to Ukraine, the largest portion of a $136.5 billion (£101 billion) international support package. The funds, expected to disburse as early as April, aim to cover Ukraine's budget deficit over the next two years. Marchenko warned that without this aid, Ukraine's survival would be at risk.
"Our strong army depends on our strong economy," he stated. "All resources we mobilize internally are channeled toward defending our nation. While we are grateful for international support, Ukrainian taxpayers are the backbone of our war effort."
Tax reforms and domestic revenue drive
In December 2024, Ukraine implemented its first wartime tax increases, targeting personal incomes, small businesses, and financial institutions. These measures are projected to generate $67.5 billion in domestic revenue this year, a 15% increase from 2025. However, the 2026 budget allocates $112 billion in spending, with 60% earmarked for military needs, leaving a $45 billion gap.
To address the shortfall, Kyiv is pushing for additional tax hikes before the end of March, including higher levies on digital platforms and reduced value-added tax exemptions. These reforms are tied to an $8.1 billion International Monetary Fund (IMF) loan, the first $1.5 billion tranche of which was received earlier this month. IMF mission chief Gavin Grey stressed that Ukraine must "live within its means" and tackle tax evasion to sustain its economy.
Political hurdles and economic strains
Hungary's Prime Minister Viktor Orbán has delayed the EU loan, accusing Ukraine of imposing an "oil blockade" by slowing repairs to a pipeline supplying Russian oil to Hungary. Kyiv attributes the delays to Russian attacks injuring repair crews. The dispute has raised stakes ahead of Hungary's elections next month, with Ukraine's financial stability hanging in the balance.
Critics, including the Ukrainian Institute of the Future, argue that continued war and tax increases risk pushing the country toward default. Inflation, though down from a peak of 26.6%, remains at 7.4%, squeezing businesses and consumers. Tetiana, a 65-year-old pensioner in Kyiv, shared her struggles: "I work because my pension is too small. Food and utilities keep getting more expensive."
Mykyta, a 19-year-old restaurant worker, described operational challenges: "Salaries are low, and staffing is difficult. Power outages force us to rely on generators, disrupting work." The central bank recently cut its 2026 growth forecast from 2% to 1.8%, citing energy shortages as a major constraint.
Rebuilding and foreign investment
Ukraine's government estimates the cost of post-war reconstruction at $588 billion, nearly 2.5 times its GDP. The bill, compiled with the EU, World Bank, and UN, covers housing, infrastructure, and demining efforts. Despite the challenges, foreign interest in Ukraine is growing. Gennadiy Chyzhykov, president of the Ukrainian Chamber of Commerce and Industry, noted an influx of delegations exploring investment opportunities.
"Businesses believe in Ukraine's victory and see long-term potential," Chyzhykov said. However, a labor shortage-projected at 8.7 million workers by the UN-poses a significant hurdle. Some leaders suggest importing foreign workers to fill gaps.
International support and uncertain future
The European Bank for Reconstruction and Development (EBRD) has invested over $10 billion in Ukraine since 2022. President Odile Renaud-Basso emphasized the need for a "credible peace settlement" to attract sustained investment but pledged continued support "for as long as it takes."
Marchenko acknowledged the dual challenges of war and economic recovery: "We need military and budgetary support. But the resilience of our people and government is driving changes that will build a stronger economy for the future."
