Experts estimate that an additional $90 billion will be needed for the 'Ukraine Plan' aimed at rebuilding the country's infrastructure and economy between 2025 and 2027. If these funds are provided and all previous commitments are fulfilled, Ukraine's GDP is expected to be approximately 10% below its pre-war level by 2027, returning to that level by 2029.
The 'Ukraine Plan' is essentially part of the country's preparation for EU membership. However, previous projections assumed that the war would end this year, which is clearly not going to happen. Each additional year of war delays the achievement of these goals by six months and increases the required funding.
In principle, these needs could be partially covered by a loan that the EU and the US have agreed to provide to Ukraine, based on future revenues from frozen Russian assets. However, it was recently revealed that Germany plans to halve its direct financial assistance to Ukraine next year, expecting that these funds will be replaced by the loan. Other European countries are likely to follow Germany's lead.
As a result, the loan – of which the American portion is intended to be transferred to Ukraine by the Biden administration this year, before a new administration takes office – will ensure Ukraine’s funding next year, even if Trump returns to the White House. On the other hand, the objectives of strengthening Ukraine's resilience and economy will not be achieved in the near term.
Chancellor Scholz's decision to reduce direct aid has faced criticism from the press and opposition. However, the political climate in Europe and Germany is forcing him to be more cautious than usual.
In 2024, Kyiv will likely receive all the aid it has requested, said Andriy Pyshnyy, the Governor of the National Bank of Ukraine, in an interview with Ukrainian Forbes. So far, $24.6 billion has been received, with the EU contributing $13 billion, the US providing $3.9 billion, and the International Monetary Fund (IMF) allocating $3.1 billion. About $13.5 billion still needs to be secured. However, the outlook for 2025 and beyond remains uncertain.
At the same time, from 2025 to 2027, Ukraine will need additional financial assistance to achieve the government's planned pace of economic recovery amid ongoing or post-war conditions, according to a new report by the Kyiv School of Economics (KSE). The authors estimate that Ukraine will require $90 billion in external funding for both current expenditures and investments during this period, while existing commitments only amount to $62.5 billion, of which only $27 billion is currently guaranteed. For 2025, external funding already secured is $15 billion, while the projected budget deficit is $40 billion. In 2026-2027, the deficit could reach $50 billion (if the war with Russia ends or de-escalates next year), but so far, only $12 billion in external financing has been confirmed.
The KSE experts base their estimates on goals outlined by Ukrainian authorities earlier this year in a strategic document called The Ukraine Plan. The plan envisions that by 2027, Ukraine’s GDP will be roughly 10% below the 2021 level, with a return to pre-war levels expected by 2029. However, the plan assumed that the hot phase of the war would end in 2024. KSE experts clarify that each additional year of conflict delays goal achievement by about six months. To meet the plan’s targets, public investment in 2025-2027 needs to increase from the planned $140 billion to $200 billion.
KSE experts emphasise that investment will be the primary driver of economic recovery once active hostilities end. The second most important factor will be the recovery of exports. Meanwhile, the role of government consumption is expected to decrease due to an inevitable reduction in military spending. Private consumption is also projected to decline: its current strong performance (adding 5.2 percentage points to GDP change in 2024) is driven by rising wages, which are the result of a shortage of skilled workers caused by emigration and mobilisation.
These plans are not just wishful thinking by Ukrainian experts. Ukraine is in negotiations to join the EU, and to advance this process, not only are reforms and legislative alignment required, but also progress toward the economic metrics necessary for full membership. This underscores the need for a dynamic economic recovery plan.
Meanwhile, the volume of international financial assistance to Ukraine may not increase and could instead decrease sharply, warn experts at the Kiel Institute for the World Economy (IfW). IfW tracks the delivery of all forms of aid to Ukraine – financial, military, and humanitarian – through the Ukraine Support Tracker (UST) project. For 2024, Ukraine’s partners have planned a significant reduction in humanitarian aid, likely assuming that the intensity of hostilities will diminish. For instance, the European Commission has allocated only €88.5 million for 2024, down from €335.4 million in 2023. Indeed, UST data shows that humanitarian aid flows have slowed substantially in recent months. In reality, the need for humanitarian aid in settlements near the front lines has even increased this year, while demand remains high in other parts of the country, notes Caritas, a charitable organisation working in Ukraine. Aid for reconstruction and humanitarian efforts is critically important, but funding remains paltry, laments the UST project leader. With winter approaching, Western countries must increase support for the restoration of critical infrastructure and energy systems, he argues.
According to the optimistic baseline scenario from UST experts, Ukraine could receive a total of around €100 billion in 2025: €59 billion in military aid and €54 billion in financial assistance. However, this optimistic scenario is unlikely to materialise if Donald Trump becomes the new US president, IfW experts note. He will likely attempt to block the allocation of new American aid packages, resulting in a total aid volume of €80 billion: €34 billion in military assistance and €46 billion in financial support.
However, direct European aid may also turn out to be more modest. The draft budget of Germany for 2025, which was reviewed by Reuters journalists, reveals that Germany – Ukraine's key partner in Europe – plans to halve its military assistance from €8 billion to €4.3 billion. Other European donors are likely to follow Germany’s example. If both risks materialise, military aid could amount to only €29 billion, and financial aid to €27 billion.
In reality, this reduction does not mean that Ukraine will be left without funds. European officials suggest that this assistance will be replaced by recently approved loans that the EU and the U.S. will provide to Ukraine against the collateral of frozen Russian central bank assets. The EU has agreed to allocate €35 billion, while the U.S. plans to provide $20 billion. However, these amounts are not yet included in the forecasts from KSE and IfW because the terms and timeline for their disbursement are still undefined. According to Bloomberg sources, the US may be able to provide its loan in full this year to avoid leaving this task to a new administration. This is good news, as it means Ukraine will not find itself in a critical situation next year even if Trump returns to power. It is also possible that European countries will adjust the scale of their cuts to direct aid.
The bad news, however, is that as the cessation of hostilities is delayed, a significantly larger amount of funds is required to fulfil the ‘Ukraine Plan’. Kyiv had hoped that additional aid would come in the form of loans financed by income from frozen Russian assets. This is supported by the comment from the Governor of the National Bank of Ukraine, Andriy Pyshnyy, in his interview with Forbes, where he referred to this loan as a 'positive risk' that would allow for 'doing more and faster with many useful things.' Experts from KSE and the Kiel Institute also believe that the loan should serve as additional aid.
However, Chancellor Olaf Scholz's government, looking at the political landscape, has made a different decision. Frankfurter Allgemeine reported last summer, citing its sources, that new assistance to Ukraine would not be provided – only previously announced funds. It is now clear that direct aid will be reduced with the expectation of being replaced by loans. This means that the goals for enhancing Ukraine’s resilience and economy by 2030 will not be achieved, complicating the country’s path toward EU membership. Chancellor Scholz’s decision has drawn criticism from the press and the opposition; however, the political situation forces him to be even more cautious than usual.