In the first half of 2026, Ukraine’s budget revenues rose by 28.8% y-o-y to $57.8 bn. The main driver was external support in the form of grants, which increased 2.5 times to $13.1 bn, or 22.6% of total budget revenues. Without grants, revenues increased by 12.6% y-o-y to $44.7 bn. The largest inflows came in June, when Ukraine began receiving substantial funds under the Ukraine Support Loan (USL), a €90 bn support program for 2026–2027.

Tax revenues increased by 13.8% over the half-year to $26.5 bn. Import VAT rose by 23.5% to $7.3 bn, PIT and the military levy increased by 14.2% to $6.3 bn, and corporate income tax grew by 14.8% to $4.3 bn. At the same time, net domestic VAT receipts declined by 2.5% to $3.7 bn due to weaker domestic demand, the lagged effects of winter attacks on energy infrastructure, and higher VAT refunds.

Total government expenditures amounted to $68 bn, up 17.1% y-o-y. Defence spending reached $37.4 bn, up 15.9%, while public order and security expenditure increased by 23.2% to approximately $10.4 bn. Together, defence and security accounted for $47.8 bn, or 70.3% of total government expenditure. To meet the Defence Forces’ needs faster, the government shifted more than $7.7 bn originally planned for late 2026 to the first half of the year. This created a risk of underfinancing in Q4 2026, although USL financing significantly reduced this risk.

Budget expenditure on social benefits increased by 8.5% to $5 bn. The Pension Fund received $2.8 bn, while support for low-income households and internally displaced persons increased by 12.6% to $1.1 bn. The fastest-growing category was support for families with children, which rose by 67.9% to $0.44 bn, driven in part by higher childbirth benefits and a new monthly childcare benefit. At the same time, spending on housing and utility subsidies declined by around 10% to $0.53 bn.

The government also directed more funding toward civilian needs. Expenditure on economic affairs increased by 44.5%, primarily due to additional funding for the fuel and energy sector, railway and transport infrastructure. Intergovernmental transfers rose by 39.3%, largely reflecting higher education spending and increased teachers’ salaries. Overall, civilian sectors accounted for approximately $20.2 bn, or 29.7% of total government expenditure.

At the same time, gross external loans fell from $15.6 bn last year to $6.1 bn. Of this amount, $2.8 bn was received from the EU under the Ukraine Facility, $1.5 bn from the IMF, and a further $1.4 bn from the IBRD. On the domestic market, government borrowing was used primarily to refinance existing debt rather than to cover new spending. Over the half-year, gross domestic bond issuance amounted to $5.3 bn, while six domestic government bond exchange auctions totaling $1.5 bn allowed part of the repayments to be shifted to later dates.

One of the key developments was budget amendments aimed at integrating the funds from the Ukraine Support Loan (USL) into the budget system. Following its approval, projected budget revenues increased by $58.9 bn, while the projected deficit was reduced from 18.5% to 12.1% of GDP. Of the funds envisaged, approximately $40.4 bn was allocated to defence and $16.8 bn to general budget support. The Ministry of Defence received an additional $45.1 bn in appropriations, mainly for weapons and military equipment. Total state and state-guaranteed debt stood at $211.6 bn at the end of H1 2026, while external state debt increased by 21% y-o-y to $161.3 bn.

Risks remain elevated for the second half of 2026. By year-end, total expenditure could reach a record $143.5 bn, of which approximately $101.5 bn would be allocated to defence and security. Additional funding will be needed for weapons procurement and production, military remuneration, and mobilization needs. At the same time, budget revenues could be affected by new Russian attacks on energy infrastructure, businesses, ports, and transport infrastructure. Another risk is delays in fulfilling commitments to the EU and IMF, as further financial support depends on the timely fulfilment of these obligations.