EU Aid to Ukraine Is Stalled: What Lies Ahead for Ukraine’s Budget

Ukraine will face the need for radical cuts to state budget expenditures if parliament fails to adopt the unpopular decisions necessary to unlock billions in Western aid ahead of winter. At present, the state of public finances is assessed as “close to critical.”

He stated this in an interview with Bloomberg, Serhii Koretskyi, Ukraine’s new prime minister.

According to the head of government, the months-long deadlock in the Verkhovna Rada has already led to a delay in approximately $4 billion in aid from the European Union, which was supposed to arrive in the third quarter.

The situation is complicated by the fact that, in the fifth year of the full-scale war, Ukraine is facing an additional defense budget deficit of $27 billion for the current year. Despite this, lawmakers are resisting the adoption of reforms demanded by key donors—the EU and the IMF.

“I see this as a failure to understand the scale of the problem. This budget is not elastic. So I want to tell you in advance: no. You need to vote. You need to move forward,” Koretskyi told lawmakers in his first interview with international media as prime minister.

At the same time, he called on international partners to reduce financial uncertainty by providing Ukraine with medium- and long-term funding guarantees.

Tax on international parcels as an alternative to cutting expenditures

One of the most controversial demands made by foreign donors to bring the economy out of the shadow and replenish the budget is the introduction of VAT on low-cost international parcels, which are currently exempt from customs duties.

Critics argue that this step will burden ordinary Ukrainians and will not generate significant revenue. However, the prime minister is actively defending the initiative, emphasizing that the current system gives foreign producers an unfair advantage. The government has already resubmitted the relevant bill to parliament for consideration.

“What is the alternative? Cutting expenditures to the absolute minimum,” Koretskyi replied.

The prime minister explained that the costs of waging the war continue to rise rapidly, in particular because of changes in the tactics of Muscovite terrorists and the use of more technologically advanced Shahed drones.

Ukraine is forced to use expensive missiles to shoot down cheap Muscovite targets: whereas an interceptor missile previously cost tens of thousands of dollars, its cost may now reach hundreds of thousands, and sometimes even a million dollars. In the past week alone, Moscovia launched nearly 1,200 drones at Ukrainian territory.

Serhii Koretskyi, who replaced Yuliia Svyrydenko in July (he previously headed Ukrnafta and “Naftogaz”), is preparing the country for the toughest winter since independence. As Moscovia has shifted the focus of its attacks to civilian and commercial targets (pure terror, according to the prime minister), the government has launched extensive preparations:

• the number of mobile “Points of Invincibility” is being significantly increased;
• additional repair crews are being formed across the country;
• foreign rescue specialists are planned to be brought in for the rapid restoration of infrastructure;
• citizens are being urged to make more active use of state preferential lending programs to ensure their own energy independence.

When journalists asked what the government’s main goal was for this winter, the prime minister answered with one word: “Endure.”