War in 2025: Will Ukraine have enough funds to sustain military operations, pensions, and social benefits?

Will it end quickly? What economists say about the prospects of concluding the active phase of the war in 2025

Experts currently discuss two main scenarios. The first is the continuation of the war throughout 2025. The second involves negotiations and a cessation of hostilities by September 2025.

The most likely scenario is that the war may persist in various forms and with varying intensity. Therefore, it is premature to expect a specific end date.

According to financial analyst and member of the Ukrainian Society of Financial Analysts Andrey Shevchishin, there is still a high probability of concluding the active phase in 2025. There are grounds for this, particularly in the deteriorating economic situation in Russia, which suggests that, according to the expert, the Kremlin may be potentially ready to engage in negotiations. "If the war continues throughout the year, Ukraine will require mobilization, and if we do not enter a negotiation track, we will need to implement stricter recruitment measures for the army, altering mobilization rules, which will result in the withdrawal of working individuals from the economy. We may face serious economic challenges. Additional recruitment to the army of, for example, 500,000 people means increased state budget expenditures and losses in the real economy sector, leading to a significant decline in tax revenues," Andrey Shevchishin explains.

In his view, the baseline scenario is the conclusion of the active phase or a freeze in the first half of 2025, followed by prolonged negotiations during that year.

"Forecasting is a complex matter, and even in the most stable times, it often carries uncertainties. The fact that many economists at the end of last year leaned toward the idea of concluding the active phase of the war in mid-2025 was quite understandable based on military events and political dynamics. However, considering the current state of the front and the evolving situation, it is challenging to predict precise timelines. It is difficult to assert whether this is the most likely scenario. The war can change its phases, and even the most realistic forecast may need to be revised depending on new circumstances, especially in light of the events we are currently witnessing," states Inna Provotar, head of the management accounting and business analysis department at OTP Bank. She adds that the most probable scenario is that the war may continue in various forms and with different intensities. Hence, it is still too early to count on a specific end date.

Funding for Ukraine: how much assistance will come from partners and is there a risk of halting aid?

The prospects for receiving assistance from international partners in 2025 look optimistic, says Inna Provotar. According to her, Ukraine has already reached agreements for a substantial volume of funding, expecting to attract over $38 billion to cover critical non-military budget expenditures. The primary sources of these funds include the Extraordinary Revenue Acceleration for Ukraine (ERA) mechanism from G7 countries, as well as the EU’s Ukraine Facility program. Additionally, funding from the IMF has already been confirmed, which increased disbursements for Ukraine from $1.8 billion to $2.7 billion for the next year.

"Collaboration with other international financial institutions, particularly the World Bank, continues, enabling the implementation of crucial projects, especially in the energy sector and infrastructure recovery,"

On a positive note: Ukraine is set to receive $38 billion in aid, and the new U.S. administration will not impact this process.

Thus, financial matters for Ukraine this year are secured, and fund inflows are guaranteed, independent of the new administration's decisions in the U.S. This means that pensions, budget payments, and subsidies will be supported by financial inflows.

However, risks are already emerging for 2026, says Andrey Shevchishin. "For 2026, such risks exist. Some funds will still come from frozen Russian assets, but regarding other programs, there are no agreements in place. The closer we get to 2026, the more challenging it will become. We need to understand how to cover the budget gap," the expert explained.

Overall, experts are confident: the Ukrainian economy has already shown resilience amid the war, but another year of conflict could pose difficulties for both businesses and public finances.

Exchange rate in 2025: what factors will influence currency fluctuations in the market

Currently, analysts indicate that there will not be significant currency fluctuations for the time being. As reported by ICU, the NBU allowed the hryvnia exchange rate to weaken by only 0.4% over the past week, although it had to increase interventions by half — slightly above the average weekly volume throughout the entire duration of the Russian-Ukrainian war.

"The currency deficit in the interbank market nearly tripled last week — from $94 million to $250 million. Meanwhile, in the retail segment, net purchases dropped by 28% to $178 million. As a result, the overall currency deficit in the market increased by a quarter (compared to the same period last week) to $428 million. The increase in the deficit led to a 47% rise in NBU interventions to $670 million.," ICU reported. Analysts believe that if the market deficit remains close to last week's levels, the NBU will be able to maintain the hryvnia exchange rate near 42 UAH/USD without significant changes in intervention volumes.

However, further into 2025, the hryvnia is still expected to face devaluation, influenced by the situation with potential peace negotiations, the balance of power on the front line, the budget deficit levels, the timely receipt of pledged international aid, and production and export volumes.

"By the end of the year, we will see a rate exceeding 45 UAH per dollar. Devaluation is necessary since we require budget financing. To meet the revenue plan, including customs-related revenues tied to the exchange rate and excise taxes. Therefore, the hryvnia is set to decline. The only factor that could reverse this trend is if elections occur," Andrey Shevchishin noted.