In 2024, Ukraine’s total external financing reached $41 billion, with major contributions from 11 international donors. The EU and IMF emerged as two of the largest financial backers, working to ensure Ukraine’s economic stability while also setting conditions for long-term financial sustainability. The EU provided $14 billion in loans and $3.2 billion in grants, primarily through its Ukraine Facility financing program. However, unlike US grants, most European contributions require eventual repayment – a factor that increases Ukraine’s long-term financial obligations. The IMF has also played a pivotal role, offering $15.5 billion through an Extended Fund Facility (EFF) program to support Ukraine. By the end of 2024, Ukraine had already received $9.8 billion, with an additional $2.7 billion scheduled for 2025, according to a statement by Prime Minister Denys Shmyhal. This financing is contingent on Ukraine implementing key economic and anti-corruption reforms – a requirement that could influence the pace and reliability of future disbursements. “The EU, understanding the risks of US support as early as last year, made a decision that will help offset a potential financial gap,” Betliy said. Less than a week after the Oval Office clash between Trump and Zelensky, several EU countries announced additional financial and military aid packages to Ukraine. Previously, EU chief Ursula von der Leyen presented a five-part plan to mobilize some €800 billion ($870.3 billion) for Europe’s defence – and help provide “immediate” military support for Ukraine after Washington suspended aid. “‘ReArm Europe’ could mobilize close to €800 billion of defence expenditures for a safe and resilient Europe,” she told reporters in Brussels on March, 4. And during a meeting with Zelensky last week, European leaders backed even more plans to increase spending on defense. Meanwhile, the EU parliament reported that €210 billion ($227.01 billion) in assets from the Central Bank of Russia are being held in the union and “remain frozen under sanctions imposed over Moscow’s invasion of Ukraine in February 2022.” Apart from Europe’s part in the ERA loan and additional fresh packages of direct aid, Europe and Ukraine are committed to the Ukraine Facility – the European Union’s financial assistance programme for Ukraine. During the period of 2024-2027, the EU has already promised Ukraine €50 billion ($54.3 billion) in funding through the Ukraine Facility program for the state budget, private investment, and technical assistance. In return, Ukraine must implement economic reforms. If Kyiv fails to reform the country, it will face lower tranches, European audits, and strict control of the transactions from the EU. Another challenge is to create regulations that will help the private defense sector flourish, fueling both Ukraine’s defense efforts and providing taxes to the state budget. “The government should refrain from populist programs and increase defense funding. It is crucial today to secure longer-term contracts with Ukrainian arms manufacturers,” Betliy told Kyiv Post. “Defense manufacturers create jobs, pay taxes in Ukraine, and are therefore not only essential for the sustainability of the defense sector but also for the economy.” The increased demand for the military enlarged the share of public administration and defense sector in Ukraine’s GDP from 6% to 22%, National Bank of Ukraine Deputy Governor Sergiy Nikolaychuk exclusively told Kyiv Post. Military needs fueled industrial machinery manufacturing, drone production, textile work, and the food industry, he said. One constant hurdle remains: while the EU’s financial assistance was designed as mid-term economic stabilization, Ukraine’s war effort still requires immediate cash flow for military expenditures – something European institutions have been less willing to directly finance so far. Domestic tax revenue and government bonds: A major self-sustaining effort While international funding remains essential, Ukraine itself has become one of its largest financial backers. In 2024, Ukraine’s state budget was bolstered by $15.6 billion in domestic government bonds, making Ukrainians the second-largest contributors to their own war effort. These bonds, purchased by Ukrainian financial institutions, businesses, and individual citizens, have provided a critical financial buffer since the beginning of the war. The total volume of bonds purchased has exceeded one trillion hryvnias since the full-scale invasion began. However, government bonds are costly for Ukraine – interest rates comprise 16% on average according to the National Bank of Ukraine data, making them the most expensive source of investment compared to international loans. “Although this tool is expensive, it’s a major part of the financial cushion for the country,” a second source from the Ukrainian Ministry of Finance told Kyiv Post to explain the significance of domestic bonds, despite their high cost. “You can see on the graph how important that is.” Tax revenue remains another major source of domestic funding. However, given Ukraine’s wartime economy and the displacement of millions, internal revenue alone cannot fully sustain the budget, particularly military expenses. Ukraine’s economy has been completely reshaped by war and cannot revert back to a peace-time economy quickly – restricting financial tools that might otherwise be available. “But while the full-scale war continues, returning to ‘peacetime’ indicators, with pre-war debt level and budget deficit, is absolutely impossible,” the Minister of Finance Serhiy Marchenko told Kyiv Post during his press briefing in November. Even if Ukraine agrees to a ceasefire that guarantees a stable peace, Ukraine’s economy needs time to recover from the stress caused by the full-scale war. “For the necessary macro-financial conditions to fully materialize, it is most likely that we will need to rely on a just and lasting peace,” Nikolaychuk told Kyiv Post. “Security risks and their reduction will also be gradual: there won’t be an immediate switch from one mode to another.” Can these alternatives replace US aid to Ukraine? Ukraine has successfully built a diversified financial safety net to sustain its economy, but when it comes to military aid and intelligence-sharing, no alternative fully replaces US support. European loans, IMF programs, and domestic bonds ensure Kyiv can cover social spending, government operations, and long-term economic stability. But when it comes to immediate war-related expenses – like purchasing weapons, producing drones, and supplying troops – Ukraine still heavily relies on Washington’s backing. “The government should refrain from populist programs and increase defense funding,” Oleksandra Betliy, an analyst at the Institute for Economic Research and Policy Consulting (IER), told Kyiv Post, emphasizing that securing long-term contracts with domestic arms manufacturers is now more critical than ever. “Defense manufacturers create jobs, pay taxes in Ukraine, and are therefore not only essential for the sustainability of the defense sector but also for the economy,” she added. While European nations have stepped up economic support, many Western allies remain hesitant to provide Ukraine with the same level of direct military assistance that Washington did before Trump’s aid freeze. Despite recent EU defense initiatives, Europe remains cautious about directly financing Ukraine’s armed forces at the scale required for sustained resistance against Russia. Ukraine’s ability to maintain its war effort now depends on two key factors: Whether European allies will increase military-specific aid to compensate for potential US shortfalls, and how effectively Ukraine can expand its domestic defense industry to become more self-reliant. If Washington cuts assistance again, Kyiv will have no choice but to rely more heavily on European defense programs and its own rapidly growing military-industrial complex – a sector that has already expanded its impact on the GDP by more than three times, according to the National Bank of Ukraine. “Defending against Russia’s war is resource-intensive and will not allow a return to the low level of debt Ukraine’s GDP had before the full-scale invasion or [for Ukraine to] become less dependent on foreign aid,” Ukrainian Finance Minister Serhiy Marchenko told Kyiv Post in a November press briefing. The ERA loan and IMF and EU support will provide a robust financial buffer for Ukraine, but they are not a replacement for the scale of military funding previously provided by the US. A difficult road ahead Ukraine’s financial strategy has provided crucial stability for 2025, but the long-term war effort still hinges on the need to finance an economy that almost doubled in size at the start of the full-scale invasion. If Western allies in Europe and elsewhere do not step up their commitment to direct defense support to Kyiv, Ukraine will have to fight an increasingly difficult war to sustain both its economy and its very existence. As the Trump administration continues negotiations with Kyiv and Moscow, the biggest uncertainty remains whether US support will remain stable – or if Ukraine will once again face a sudden freeze in funding and military cooperation. With growing financial commitments from Europe and Ukraine’s expanding domestic defense sector, Kyiv has a fighting chance to withstand future disruptions. And recent polls show that the Ukrainian population is willing to keep fighting until a just and lasting peace can be negotiated. But in a war that still shows no signs of ending, the question remains whether Western allies are willing to make up for the military gap left by Washington’s wavering support.