THE EFFECTIVENESS OF FINANCIAL SUPPORT FOR THE ARMED FORCES OF UKRAINE UNDER MARTIAL LAW
Abstract
The article examines the financial support system for the Armed Forces of Ukraine under martial law conditions. The full-scale Russian aggression has fundamentally transformed Ukraine's public finance structure. The research analyzes the dynamics of defense expenditures, which increased from UAH 286 billion (5.2% of GDP) in 2021 to UAH 2.97 trillion (38.9% of GDP) in 2024, representing a 10.4-fold increase. The share of defense spending in total budget expenditures reached 66.1%, reflecting the absolute priority of the state's security function. The study investigates the structure of financing sources: budget allocations, domestic government borrowings through war bonds, and international assistance. Over 1,000 days of full-scale invasion, UAH 1.36 trillion was raised through government bonds, with individual investor portfolios increasing 2.8 times. International aid totaled EUR 267 billion as of December 2024, including EUR 126 billion in military support. However, a significant gap exists between commitments and actual disbursements, with European countries fulfilling only 52% of their obligations, creating risks for medium-term planning. The research identifies key systemic problems: accumulation of accounts receivable under Ministry of Defense budget programs (UAH 294 billion in 2024), irregular international aid flows, transparency limitations due to security concerns, and insufficient reconstruction financing compared to assessed needs of USD 486 billion according to World Bank RDNA3 methodology. The article substantiates priority directions for improving efficiency: defense procurement transformation according to NATO Strategic Defense Procurement Review recommendations (intermediary contracts reduced from 82% to 12%, ammunition prices decreased by 23%); financing source diversification including the G7 ERA Loan of USD 50 billion backed by frozen Russian assets; and financial control enhancement based on NATO standards and ISO 37001:2016 international standard. The implemented institutional reforms create prerequisites for aligning Ukraine's defense financing system with NATO and EU standards, constituting an essential component of Euro-Atlantic integration.
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