Key facts
- Ukraine anticipates a difficult winter due to Russian attacks on critical infrastructure and overall economic conditions.
- Damage to infrastructure and fixed assets from Russian air strikes is estimated at $10 billion this year.
- The broader economic costs of attacks and port blockades are estimated at 1.5 percentage points of GDP.
- Approximately $40 billion in export revenue is at risk due to Russia's blockade of Ukraine's Black Sea ports.
- Domestic budget revenue underperformed by $1.35 billion in the first eight months of the year.
- Ukraine spent $42 billion on defense in the first eight months, but domestic revenue and local borrowing only generated $39 billion.
Ukraine is preparing for a challenging winter as escalating Russian attacks on its infrastructure and key export industries worsen a deepening budget crisis, according to Ukrainian officials. Economy Minister Oleksandr Kravchenko stated that damage to infrastructure and fixed assets from Russian air strikes is estimated at nearly $10 billion this year. He also noted that the broader economic costs from the attacks and the de facto blockade of its ports are projected to be about 1.5 percentage points of gross domestic product.
Kravchenko expressed concerns about the upcoming winter, citing the daily destruction of critical infrastructure and the overall economic conditions. He highlighted that these challenges arise while the budget and fiscal space are severely constrained. With the front-line fighting largely stalled, Russia and Ukraine have increasingly focused on targeting logistics networks and economic assets to undermine each other's war efforts. For over two weeks, Russia has conducted near-constant drone attacks on Kyiv, disrupting daily life, businesses, and government operations. Both nations deny deliberately targeting civilians in air attacks.
Russia has also intensified air attacks on southern regions, effectively blocking Ukraine's Black Sea ports. Kravchenko indicated that approximately $40 billion in export revenue is at risk due to this blockade, impacting Ukraine's main exports of agricultural products and iron and steel. Meanwhile, domestic budget revenue has come under pressure. Roksolana Pidlasa, head of the parliamentary budget committee, reported that domestic revenue underperformed by $1.35 billion in the first eight months of the year, with a quarter of these losses occurring in August alone. Pidlasa explained that the war's increasing cost means Ukraine can no longer fully finance its defense needs from domestic resources as it did in previous years. The country spent about $42 billion on defense in the first eight months, excluding in-kind military support, but domestic revenue and local borrowing yielded only $39 billion during the same period. The daily cost of the war has risen to approximately $190 million this year, up from $140 million in 2024, attributed to inflation, increased troop numbers, social payments, and higher ammunition consumption. Ukraine faces an additional funding gap for its defense through the end of the year and is seeking to cut non-military spending and negotiate further financial support from Western partners, though no immediate solution has been found.