Ukraine Finance Chief Warns of Severe Budget Crisis Ahead of ‘Very Difficult Winter’

Kyiv is bracing for what Finance Minister Sergii Marchenko describes as the most severe budgetary constraints since the onset of Russia’s full-scale invasion in 2022. With Russian attacks intensifying sharply this August, Marchenko warned that Ukraine may be forced to delay non-military payments unless additional funding is secured from international partners.

Speaking to Euronews, Marchenko highlighted growing liquidity issues within the national budget. “We already see some liquidity issues, and we envisage some shortages in our budget,” he said. “It means we may have to postpone some payments not related to the war because of a lack of liquidity. There will be consequences.”

While Marchenko asserted that these delays would not impact external creditors, he acknowledged significant implications for domestic infrastructure and civil defense projects. Critical activities, such as the construction of air raid shelters and other wartime infrastructure, could face setbacks as the country prepares for what he termed a “very hard winter” driven by escalating Russian aggression.

The finance minister is currently drafting a new budget based on the assumption that hostilities will persist into 2027. This projection includes an estimated funding shortfall of €32.6 billion, a figure reportedly corroborated by the International Monetary Fund during its recent visit to Kyiv.

To address this deficit, Marchenko is urging European ministers to “think outside the box” and support a revised Ukrainian proposal to utilize approximately $300 billion in frozen Russian assets. The plan, which recently gained momentum from a coalition of EU nations led by Sweden, seeks to shift legal custodianship of the assets from Belgium to the broader EU collective. This structural change aims to mitigate legal risks for Belgium and Euroclear, which currently holds the frozen funds.

Marchenko emphasized that the new framework would transform potential legal disputes with Russia into a shared responsibility among all 27 EU member states. However, the initiative faces substantial hurdles. A similar plan was rejected by EU finance ministers last December due to opposition from Italy and France, alongside concerns raised by the European Central Bank regarding reputational damage and legal retaliation from Moscow.

Support for the asset freeze strategy has grown among key allies including Poland, Sweden, the Netherlands, and Spain, who argue that the financial burden of the war should be equitably distributed among European taxpayers, particularly as the United States has shifted its stance following recent leadership changes.