Minister of Finance explains why the €1.5bn tranche of the €50bn allocated by the G7 will not be physically delivered to Ukraine

In an interview with RBC-Ukraine, Ukrainian Finance Minister Sergii Marchenko said that each day of the war with Russia costs the country's budget approximately €120 million.

Thus, Kyiv's monthly spending on security and defence amounts to about €3.7 billion.

‘Every month we spend 166 billion hryvnias on the security and defence sector, and every day we spend an average of 5.6 billion hryvnias. All the funds we have on the Treasury account through taxes or domestic borrowing are prioritised for the security and defence sector. There is no need to link the military tax to any special funds. We already do not have enough revenue to cover our military needs,’ Marchenko said.

The Minister of Finance stressed that Ukraine lacks more than €11 billion in the budget for 2024. The majority of these funds are to be raised by raising taxes, and the government has recently submitted a new draft law to this effect.

Since the full-scale Russian invasion, Ukraine's budget has been filled by more than half through loans and donations from Western countries.

The IMF has disbursed $15.6 billion in financial support to Ukraine under the Extended Fund Facility (EFF) programme, to be paid in regular tranches until 2027.

Ukraine received the last tranche of $2.2 billion in early July. Under the IMF programme, Kyiv has also received political commitments from its partners worth $122 billion by 2027.

Last year, Ukraine received $42.5 billion in external financing from various donors, which allowed it to function in the face of war.

The IMF said that Ukraine will need about the same amount to support this year's budget.

Sergii Marchenko also commented on the decision of the G7 to provide Ukraine with €50 billion in proceeds from frozen Russian assets received since the beginning of 2024 – the first tranche will be €1.5 billion.

Ukraine was expected to receive the funds in July 2024. 90% should be used for military needs, 10% for reconstruction.

Marchenko noted that Ukraine will not receive these funds in physical form.

‘There is such a decision. There are such funds. Will they go to the budget of Ukraine? The probability of this is very low. Will this money be used to purchase weapons for Ukraine? Yes. I think this money will be used either to purchase weapons for Ukraine or to compensate our partners for the costs of purchasing weapons that have already been incurred,’ he explained.

‘These funds will come to Ukraine in the form of specific weapons. This option is more guaranteed. Of course, for us, budget funds are better than weapons. But weapons are also a solution,’ the minister added.

Background. As a reminder, according to Marchenko, Ukraine and the IMF estimate additional financial needs for 2025 at $12-15 billion.