Marchenko urges G7 to finance AFU as part of integration into European security system

Ukraine is forced to maintain military spending at a high level due to Russian aggression, which is creating a significant state budget deficit, Finance Minister Serhiy Marchenko said at a meeting of finance ministers and central bank governors of the G7 member countries, the leadership of the IMF and the World Bank, the European Commission and the OECD, and called for a systemic and long-term solution, which could be partial financing of the Ukrainian army by partners as part of its integration into the European security system.

"This is a strategy that can solve two problems at once: increase security in Europe and allow Ukraine to maintain macro-financial stability," the press service of the Ministry of Finance said, citing him from a meeting in the Canadian city of Banff on Thursday.

It is noted that among the key topics for discussion was financial support for Ukraine in 2026, in particular, the provision of the Ukrainian army.

He said that in 2021 the state budget deficit was 3.8% of GDP. After the start of the full-scale war, the economy shrank by almost 30%, and the deficit increased to 20% of GDP due to a sharp increase in military spending, from 5% to 30% of GDP.

According to the minister, without taking into account military spending and wartime factors, the budget deficit has the potential to gradually decrease: from 6.8% of GDP in 2022 to 4.2% in 2023, 0.6% in 2024 and 0.2% in 2025, but economic recovery is possible only by strengthening Ukraine's defense capabilities.

"The costs of maintaining the Ukrainian armed forces to ensure the security of Europe constitute a small share of the EU's GDP. It can be distributed among countries that are ready to join the initiative and taken into account when calculating defense spending in accordance with NATO commitments," Marchenko said.

He said that, given the military risks, Europe is already looking for ways to strengthen its defense, in particular by increasing the number of armies, but building such a potential will require years and significant resources, while integrating the Ukrainian military potential is a practical solution.

As reported, the IMF, in the updated Extended Fund Facility program with Ukraine during the seventh review, included a forecast for reducing the state budget deficit from 19.6% of GDP this year to 10.1% of GDP next year. According to a number of experts, reducing the deficit by almost half will require approximately the same reduction in military spending, which is currently impossible even under the conditions of cessation of active hostilities.

Ukrainian President Volodymyr Zelenskyy said at the Munich Security Conference in February 2025 that in the absence of NATO membership, the country should maintain a large armed forces of 1.3-1.5 million servicemen and appropriate weapons as a security guarantee. "We need to have money for this," he said. At another time, he estimated the necessary army size at about 1 million.