The Ukrainian government has included a large-scale initiative in the 2027 state budget draft to compensate businesses for wartime losses amounting to 58.7 billion hryvnias. The Ministry of Economy expects this program to help attract between 2 and 4 billion dollars in international donor funds, providing domestic enterprises with up to $10 million to restore assets destroyed by missile strikes.
Financial Sources and Budgetary Risks
The primary source of funding for the new fund is planned to be an increase in the standard VAT rate from 20% to 21%. However, KSE Institute experts highlight severe risks: out of 131.3 billion hryvnias in additional revenues from tax measures, only 14 billion are backed by existing legislation. The remaining funds require new parliamentary decisions that have not even been registered in the Verkhovna Rada yet.
First-Loss Model and Commercial Market Limitations
The state-proposed scheme relies on the First-loss principle, where the budget absorbs the first layer of wartime losses, creating space for commercial insurance. According to Ministry of Economy estimates, annual business asset losses range from 4 to 10 billion dollars, while the capacity of the entire classical insurance and reinsurance market does not exceed 1 billion dollars. Meanwhile, 94% of Ukrainian companies still lack adequate coverage.
Contradictory Data
During the discussion of the initiative, noticeable discrepancies emerged regarding implementation timelines and funding volumes. While the Ministry of Economy leadership declares plans to launch the program strictly from January 1, 2027, provided sources are found promptly, independent analytical centers emphasize the absence of necessary bills in parliament. Furthermore, business representatives point out that the $10 million limit is insufficient for large critical infrastructure enterprises requiring special portfolio insurance mechanisms.
Expert Evaluations and Recovery Prospects
Business associations and the expert community have mixed views on the idea of raising taxes to establish the fund. On one hand, entrepreneurs urgently need asset protection in frontline territories and major cities, where classical commercial insurers have completely withdrawn programs due to undiversified risks. On the other hand, additional fiscal pressure in the form of higher VAT could negatively impact the overall competitiveness of the economy.
