During the first quarter of 2026, Ukraine’s state budget revenues increased by 6.1% compared to the same period last year, reaching $23.5 billion. The main driver of this growth was grants from international partners, which rose by 72% to $4 billion. Most of these funds were received through the ERA mechanism ($3.8 billion), while an additional $0.2 billion was provided by Norway through the World Bank.

Tax revenues increased by 11.3% to $13.1 billion. The largest increases came from import VAT (+19.8%), personal income tax together with the military levy (+16.4%), and excise taxes (+19.2%). At the same time, domestic VAT revenues declined by 7.3% due to electricity supply disruptions following Russian attacks on the energy infrastructure.

Budget expenditures in the first quarter totaled $27.5 billion, which was 1.2% lower than a year earlier. Defense spending declined more sharply, falling by 11.2% to $14.9 billion. The primary reason was a reduction in military aid volumes. Through the special fund, Ukraine’s Ministry of Defense received only $3.7 billion compared to $5.8 billion in Q1 2025. Meanwhile, expenditures on the security sector increased by 10.4% to $4.4 billion. Overall, defense and security spending accounted for around 70% of total expenditures.

Social expenditures increased by 8.4% to $2.4 billion, although this was mainly due to nominal increases in key social standards. The subsistence minimum increased by 9.9%, while the minimum wage rose by 8.1%. Starting March 1, pensions for 9.5 million pensioners were indexed by 12.1%. Spending on family support also increased by 51.8% due to higher one-time childbirth payments and the launch of new assistance under the «eYasla» childcare program. At the same time, utility subsidies declined by 10% because of the destruction of heating infrastructure and the introduction of  automatic utility bill recalculations in cases of service disruptions.

The budget deficit, including grants, narrowed to $3 billion, while excluding grants it amounted to $7 billion. External financing remained extremely limited. The IMF was the only external creditor in Q1, providing $1.5 billion under a new 48-month Extended Fund Facility program totaling approximately $8.1 billion. Ukraine also received no disbursements under the Ukraine Facility program due to incomplete fulfillment of reform commitments. As of the end of April 2026, 11 indicators for 2025 and another 6 indicators for Q1 2026 remained unmet. The €90 billion Ukraine Support Loan (USL) also failed to materialize due to Hungary’s blockage ahead of elections.

By the end of March, the reserve fund had been depleted by 95.5%, with $1.1 billion of the annual allocation already spent. To cover current needs, Ukraine’s Ministry of Finance shifted $5.1 billion in defense expenditures originally planned for Q4 to the beginning of the year. As a result, a financing gap may emerge later in the year. Preliminary estimates suggest that the financing deficit in Q4 could reach approximately $5 billion. Consequently, amendments to the state budget appear almost inevitable. Additional pressure on the budget also came from government direct-support programs for households, including cashback initiatives, winter assistance, and free railway transportation.

Total public and publicly guaranteed debt reached $210.8 billion by the end of Q1 2026. External public debt increased by 30% year-on-year to $163.4 billion. In addition, the government conducted three domestic bond exchange auctions totaling $0.9 billion, replacing short-term securities with long-term ones in order to reduce pressure on current repayments.

The outlook for the remainder of 2026 remains cautiously optimistic, although risks remain high. Following the unblocking of the agreement, Ukraine is expected to receive €45 billion under the USL program, of which €16.7 billion will be directed toward budget support and €28.3 billion toward defense needs. The first tranches are expected already in Q2. Nominal tax revenues for the year may increase by 25% to $57.2 billion. At the same time, expenditures will continue to rise, with total spending projected to reach a record $144.2 billion, of which more than $102 billion will go toward security and defense.