European Union leaders are weighing proposals to use proceeds from immobilised Russian sovereign assets, most of which are held in Belgium, to support Ukraine’s financial needs in the coming years through what has become known as the “reparations loan”.

The plan has run into resistance from Belgium, which wants other EU member states to share the financial risks in case Russia successfully sues Belgium or Euroclear, the Belgian-based central securities depository where the assets are held. President Volodymyr Zelenskiy has urged European unity, warning that Ukraine would struggle to remain economically strong without this financing.

How Much Money Does Ukraine Need?

Ukraine’s funding needs remain vast. The International Monetary Fund estimates the country will require around 135 billion euros, or $158.6 billion, in external financing across 2026 and 2027. For 2026 alone, Ukraine’s draft state budget projects spending of 4.8 trillion hryvnias, or about $112 billion, against expected revenues of 2.9 trillion hryvnias, leaving a deficit of roughly 1.9 trillion hryvnias, or about 18.5% of GDP.

Finance Minister Serhiy Marchenko has said Ukraine will need more than $45 billion in external funding next year, while parliamentary budget committee head Roksolana Pidlasa estimates that $18–20 billion still needs to be secured to close the budget gap.

Why Defence Spending Dominates

With no peace deal in sight, defence continues to absorb most of Ukraine’s public finances. Kyiv plans to spend 2.8 trillion hryvnias in 2026, equivalent to around 27.2% of GDP, on defence. Ukraine maintains roughly one million personnel in its defence forces along a front line stretching more than 1,200 kilometres across the east and south.

Officials say demand for weapons and ammunition continues to rise, with the daily cost of fighting Russian forces estimated at $172 million in 2025, up from $140 million the previous year.

Why Foreign Aid Remains Critical

Because most domestic revenue is directed towards defence, Ukraine relies heavily on international assistance to fund social spending, including pensions, healthcare and humanitarian programmes. Since Russia’s full-scale invasion in February 2022, Ukraine has received more than $160 billion in foreign financial aid from its partners.

Analysts say even a rapid peace agreement would not eliminate these pressures. While battlefield spending might stabilise, the military would still require re-equipping, modernisation, troop rotation and long-term logistical support.

How Urgent Is the EU Decision?

Timing remains crucial. Pidlasa has said Ukraine needs a positive EU decision on the reparations loan as soon as possible, with the best-case scenario being full approval in January and the first tranches arriving in the first quarter of 2026. She added that Ukraine could manage with its own resources only through the early part of next year.

Approval of the EU loan would also help unlock other international funding. Ukraine has secured preliminary approval for a new four-year, $8.2 billion IMF programme, but final approval depends on a positive decision by the EU on the reparations loan.

Analysis

Ukraine’s economic challenge has evolved from emergency survival to sustaining a war-time economy while keeping the state functioning. Defence spending now consumes the bulk of domestic revenue, leaving economic stability tied to foreign support. The EU’s frozen-assets loan is therefore central not only to covering budget gaps but also to unlocking IMF funding and reinforcing political backing. Without it, Ukraine risks deeper fiscal strain in 2026; with it, Kyiv gains time, predictability and a stronger financial foundation to continue resisting Russia.

With information from Reuters.