The Financial Support System of the Armed Forces of Ukraine under Martial Law: Structure, Mechanisms, and Transformations

Abstract

The article is devoted to a systematic analysis of the financial support system of the Armed Forces of Ukraine under martial law conditions. The relevance of the study is determined by the unprecedented growth of Ukraine's defense expenditures, which in 2024 reached 34% of GDP – the highest indicator among all countries in the world – and the necessity for scientific comprehension of transformational processes in the sphere of defense finances.

The purpose of the study is a comprehensive analysis of the structure and sources of financing of the Armed Forces of Ukraine, identification of structural imbalances in the distribution of defense expenditures, characterization of mechanisms for delivering funds to the end recipient, and substantiation of directions for transforming the financial support system to adapt it to the conditions of a prolonged high-intensity military conflict.

The methodological basis of the study is an integrated approach that combines concepts of fiscal sustainability, defense economics, and institutional transformation. Methods of systematic analysis, comparison, statistical analysis of dynamic series, and graphical data visualization were applied. The information base consisted of data from the Ministry of Defense of Ukraine, the Ministry of Finance of Ukraine, the Stockholm International Peace Research Institute (SIPRI), the Kiel Institute for the World Economy, regulatory legal acts of Ukraine, and official NATO documents.

The results of the study demonstrated the formation of a unique multi-channel defense financing model that integrates the state budget (UAH 2,23 trillion in 2025), international military and financial assistance (approximately EUR 41,6 billion annually), subventions from local budgets, and volunteer contributions (approximately UAH 93 billion over three years of war). A structural imbalance in the Ministry of Defense expenditures was identified: the ratio of personnel to armaments spending is 74:23, which significantly differs from the NATO recommended benchmark of 50:30. Systemic problems in delivering funds to the end recipient were identified, including the lack of indexation of minimum monetary allowance since February 2023 and payment delays due to bureaucratic procedures.

A transformation model for the financial support system of the Armed Forces of Ukraine was substantiated, providing for interaction at strategic (implementation of NATO standards, long-term planning), operational (digitalization, program-based budgeting), and tactical (timely delivery of funds) levels. Ukraine's progress in implementing NATO standards was analyzed, including the introduction of capability-based planning, creation of the Unified Capability Catalog, and participation in the Planning and Review Process (PARP). The development of the domestic defense industrial complex and mechanisms of international defense cooperation were examined.

The scientific novelty lies in substantiating the concept of a multi-channel defense financing model as a specific institutional response to the conditions of a prolonged high-intensity conflict, systematizing the interaction of financing channels, and identifying their complementary nature. This study represents the first comprehensive scholarly analysis of Ukraine’s defense financing system that integrates all components — from funding sources to personnel compensation and arms procurement — within a unified analytical framework adapted to wartime conditions.

The practical significance of the research results lies in the possibility of their use in formulating state policy in the sphere of defense finances, improving regulatory legal framework, and optimizing the budget process in the sphere of national security and defense.