Full Breakdown
Ukraine’s War-Driven Economic Crisis Deepens as Budget Gap Widens
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Crisis in Kryvyi Rih and the National Steel Sector
On October 5, Reuters reported that Kryvyi Rih—President Volodymyr Zelenskiy’s hometown—faces a collapse of its industrial base after Russian missile strikes halted the ArcelorMittal mining and steel complex. Mayor Oleksandr Vilkul said the city of about 600,000 residents is fighting to keep hospitals, schools and public transport operating. The shutdown mirrors a broader silence across Ukraine’s steel mills, which previously supplied roughly 10 percent of national output.
Budget Shortfall and Funding Gap
Ukraine now needs $56 billion to cover this year’s fiscal deficit, about a quarter of its economic output, with $27 billion earmarked for defence. In the first nine months, defence spending reached $44 billion, while tax revenue fell to $42 billion as Russian attacks disrupted logistics and commerce. Roksolana Pidlasa, head of the parliament’s budget committee, estimated a loss of 49.5 billion hryvnias (?$1.1 billion) in tax revenue so far, potentially rising to 70 billion hryvnias by year-end. The government projects a modest 0.5-1.5 percent GDP growth, down from 1.8 percent in 2025, and warns that $29.5 billion of foreign aid is at risk due to delayed reforms.
Government Response and International Funding Talks
Prime Minister Sergii Koretskyi has urged that “all resources should be channelled into critically important areas” “All resources should be channelled into critically important areas,” — Sergii Koretskyi, prime minister. He told reporters the administration has frozen non-essential spending, postponing $900 million of capital projects until December and aiming to pass required reforms later this month to unlock further EU financing. Finance Minister Sergii Marchenko suggested tapping frozen Russian assets—approximately €210 billion held by EU states—to help bridge the projected $32 billion unfunded gap for the next fiscal year. The European Commission and Ukraine have identified funds within a €90-billion EU loan to address the shortfall, though accelerating payments could strain next year’s budgets amid upcoming elections in France and Poland.
Business Sentiment and Agricultural Losses
Industrial entrepreneur Vasyl Khmelnytskyi halted plans for three new factories, citing “risks … too great” “We have not a temporary but a structural problem with the revenues at the very time when spending really requires resources,” — Oleksandra Myronenko, an economist at the Centre for Economic Strategies, a Kyiv-based think tank. The agricultural sector, Ukraine’s top export earner, saw grain shipments drop 36.6 percent year-on-year in September after Russian strikes on Black Sea ports, endangering roughly $40 billion of export revenue, according to Economy Minister Oleksandr Kravchenko.
Verbatim Quotes
- “In Kryvyi Rih, the situation is actually worse than anywhere else, apart from the front line itself,” — Oleksandr Vilkul, mayor
- “All resources should be channelled into critically important areas,” — Sergii Koretskyi, prime minister
- “We have not a temporary but a structural problem with the revenues at the very time when spending really requires resources,” — Oleksandra Myronenko, an economist at the Centre for Economic Strategies, a Kyiv-based think tank
- “Only then we will get all the money,” — Sergii Koretskyi, prime minister