NextFin News - Ukraine's President Volodymyr Zelenskiy has rejected calls to hold elections while the war with Russia continues, warning that a wartime vote would be "a tsunami for the state" that would split the country and hand Moscow a political victory. His remarks, released to reporters on August 23, are his first public response to a challenge from Mykhailo Fedorov, the former defence minister whose surprise dismissal last month sparked nationwide protests and who has become the most prominent figure inside Ukraine to argue that democracy cannot be held hostage by an open-ended war.
The exchange is more than a constitutional dispute. It lands on a Ukrainian state budget that is already running on borrowed time: Kyiv's own tax revenues cover little beyond the military, the 2026 deficit is projected at 18.4% of GDP, and the government still needs to secure roughly $18.1 billion of the $45.5 billion in external financing it planned to attract this year. Zelenskiy's argument is that a wartime election would fracture the domestic consensus and, with it, the political unity in Western capitals that keeps those funds flowing. The president is treating political continuity as a fiscal asset - and the market for Ukraine's survival as something a ballot box could break.
The Situation: A Wartime Vote, a Split Country, and a Budget That Cannot Wait
Zelenskiy's position is uncompromising.
"I believe that if we want to destroy the country, then we can move towards elections during this kind of war," Zelenskiy said in comments made public on August 23. "Elections right now are a tsunami for the state, which will split Ukraine."
His stated strategy, he added, is "to steer the country toward an ending of the war and to preserve an independent and sovereign state."
The legal barrier is straightforward: Ukrainian law prohibits holding elections during wartime, and the constitution bars parliamentary elections while martial law is in force. The constitution also cannot be amended during martial law - a guardrail designed to prevent democratic backsliding, but one that also locks in the current political order for the duration of the fighting. Zelenskiy has previously said lifting martial law would require a ceasefire of at least 60 days, a condition that is nowhere in sight while he says Russia is preparing to mobilise an additional 300,000 troops after its own parliamentary elections in September.
The political trigger, however, is domestic. Fedorov, 35, was appointed defence minister only six months before Zelenskiy fired him in July, and his removal drew protesters into the streets of Kyiv demanding his reinstatement. On August 18, in a video address, he argued that Ukraine faced a crisis of governance and called for a "legal, safe and realistic mechanism" to renew the democratic process even in a long war.
"Democracy cannot be held hostage by Russia," Fedorov said.
It was the first such demand from a major Ukrainian political figure since the full-scale invasion began in 2022.
Public opinion does not appear to be on Fedorov's side - at least not yet. An August 5 poll by the Kyiv International Institute of Sociology found that 57% of Ukrainians want elections only after the fighting ends, and Zelenskiy's approval rating has remained broadly stable at around 60%. Within days of Zelenskiy's response, Fedorov had already pivoted, urging preparation for postwar elections rather than an immediate vote. But the episode exposed something investors in Ukraine's fate should not ignore: the war has postponed, not resolved, the question of political succession, and the longer it lasts, the harder that question becomes to defer.
Why the Election Question Is Really a Financing Question
The reason Zelenskiy frames a wartime election as existential is not only that ballots cannot safely be cast in trenches and occupied territories. It is that Ukraine's state budget is structurally dependent on foreign political consent, and an election campaign would be the fastest way to fracture it.
Look at the arithmetic. Ukraine's 2026 budget, as analysed by the Centre for Economic Strategy, allocates UAH 2.5 trillion ($55.7 billion) to the war - 24.7% of GDP - while total state spending reaches UAH 4.8 trillion ($104 billion). Domestic revenues are projected at only UAH 2.9 trillion ($62.8 billion). The result is a deficit of UAH 1.9 trillion, or $41.5 billion, equal to 18.4% of GDP. In plain terms: Ukraine's own taxpayers fund the military and little else. Everything else - debt service, social protection, education, healthcare - depends on external financing.
That external financing is stalling. The finance ministry said in March that Ukraine's external financing needs for 2026 amount to about $52 billion, of which only $5.5 billion had been received by late March. The Centre for Economic Strategy puts the external financing to be attracted this year at $45.5 billion, with $18.1 billion still unsecured. Confirmed commitments so far include roughly $9 billion to $10 billion from the EU's Ukraine Facility and $12 billion in loans from the G7's ERA initiative, backed by interest on frozen Russian central-bank reserves - leaving Kyiv roughly $18 billion short of breaking even in 2026. And the pressure does not stop at the year's end: Ukraine's Cabinet of Ministers and the International Monetary Fund estimate the external financing gap for 2026-2029 at $136.5 billion.
The composition of the aid has also shifted. Where early support came largely as grants, recent flows have been mostly loans. State and state-guaranteed debt is forecast to exceed annual GDP in 2026, reaching 106%. That transforms the political question into a credit question: Ukraine is not merely asking allies for gifts; it is accumulating claims on its own postwar tax base.
Western patience, meanwhile, is thinner than it was. A Council on Foreign Relations analysis reports that as of March 31, 2026, the U.S. Congress had made $195 billion available for Ukraine-related spending, of which 59% had been disbursed - but the last major aid law passed in April 2024, and there has been no significant new U.S. aid legislation since 2024. Under President Donald Trump, Washington has made no new aid commitments; deliveries continue from the existing pipeline, but they are running out. In June 2026 the U.S. House passed a bill to provide new aid and sanctions on Russia, but it still requires the Senate and the president. Europe has stepped into part of the gap - EU members agreed on a loan of about $106 billion in late 2025, and European countries have collectively provided more aid than the United States since the war began - but that support is itself a product of political consensus that an election campaign in Kyiv would strain.
This is the mechanism behind Zelenskiy's "tsunami" warning. A wartime election would not just be logistically difficult; it would force every Ukrainian political actor to campaign on a platform about the war - negotiate or fight on, concede territory or hold the line - while Russian missiles are still falling. It would hand Moscow a narrative that Ukraine is ungovernable, give sceptical legislators in Washington and European capitals a reason to pause, and risk the very funds that pay salaries, pensions, and power-plant repairs through the winter.
Cyclical Shock, Structural Dependency: What Is Temporary and What Is Not
It matters to separate two forces that the Fedorov episode has bundled together.
The political shock is cyclical. Fedorov's challenge arrived suddenly, but the public is not demanding an immediate vote - 57% prefer to wait until after the fighting - and Fedorov himself retreated from an immediate-election demand within days. Ukrainian politics has absorbed shocks before: the 2019 election that brought Zelenskiy to power with a parliamentary majority, the wartime consolidation after February 2022, the protests over Fedorov's dismissal. These are events that pass. The approval ratings, the poll, and the pivot all point to a political system that is stressed but not fracturing.
The fiscal dependency is structural. It will not self-correct. Ukraine's domestic revenue base cannot cover non-military spending while the war continues; Russia, by comparison, is spending an estimated $140 billion a year on the war - roughly two and a half times Ukraine's own defence budget - and can draw on a much larger economy and energy revenues. Ukraine's financing model therefore depends on three things that are outside Kyiv's full control: the duration of the war, the willingness of foreign legislatures to keep appropriating, and the credibility of Ukraine's postwar repayment capacity. None of those three reverts to normal on its own. They resolve only with a settlement, a sustained rearmament of the Ukrainian economy, or a multi-year financing commitment that does not yet exist.
This distinction drives the investment conclusion. Political turbulence in Kyiv is a headline risk that markets have learned to absorb. The financing gap is a balance-sheet risk that compounds. A government that must return to donors every few months with an uncertain outcome trades at a permanent risk premium - in the yields investors demand on Ukrainian eurobonds, in the discounts on any reconstruction-linked instrument, and in the caution with which Western companies approach contracts denominated in future Ukrainian cash flows.
The Second-Order Question: What the Market Has Not Priced
The conventional read of Zelenskiy's statement is that he is defending his own position. That is almost certainly part of it - a recent poll indicated Fedorov would comfortably beat him in a runoff. But the second-order consequence is what matters for investors: by ruling out elections, Zelenskiy is also ruling out the one mechanism that could refresh Ukraine's democratic legitimacy before the war ends, and he is betting that Western partners will prefer a predictable wartime steward to a messy democracy under fire.
That bet has a price. The longer elections are deferred, the more Ukraine's legitimacy rests on battlefield outcomes and on the personal continuity of one leader. If the front holds and aid flows, the model works. If either leg wobbles, there is no democratic reset valve - only street protests, like the ones that briefly forced Zelenskiy to reverse course on Fedorov's dismissal, or a fracture inside the ruling coalition. Investors pricing Ukrainian assets are therefore not just pricing the war; they are pricing a governance structure with no scheduled renewal.
The cross-asset transmission runs like this: a political shock in Kyiv -> a pause or review in Western appropriations -> a widening of the $18.1 billion financing gap -> pressure on the hryvnia and on eurobond prices -> higher risk premiums on reconstruction and defence contracts -> a wider discount on any Ukrainian asset tied to postwar cash flows. The first-order effect is a headline; the third-order effect is that the cost of rebuilding Ukraine rises because the state that would issue the reconstruction bonds looks less governable.
The Counter-Thesis: Democracy Cannot Be Held Hostage Forever
The strongest case against Zelenskiy is not Fedorov's - it is the one made by democratic theorists and, in softer form, by some Western officials: legitimacy decays over time, and a leader who cannot be replaced at the ballot box accumulates vulnerabilities that an adversary can exploit. Fedorov's core argument - that Ukraine must find a mechanism to renew its democratic process even in a long war - is not frivolous. Ukraine is asking Western democracies to sustain sacrifices on its behalf while suspending the very democratic practice those societies are being asked to defend. That tension does not disappear because it is inconvenient.
There is also a practical version of the critique: if the war drags on for years, a postwar election held after a decade of martial law could be more destabilising, not less, because grievances will have accumulated with no outlet. Postponement is not a solution; it is a deferral that grows more expensive with time.
The answer to that critique is empirical rather than rhetorical. The counter-thesis becomes decisive if two things happen together: first, external financing commitments for 2026 fall short of the roughly $27.4 billion threshold (the $45.5 billion planned intake minus the $18.1 billion already considered secured), which would signal that Western support is eroding regardless of Kyiv's political choices; and second, Zelenskiy's approval drops materially below 50% while no credible postwar-election timetable exists. That combination would mean the unity-first strategy is failing on both its own metrics - the money is not coming, and the public is no longer with it. Until then, the evidence points the other way: the public prefers to wait, the challenger has stepped back, and the alternative to deferral is a campaign conducted under drone fire.
What Investors Should Watch Next
The near-term watchlist is concrete. First, whether Kyiv secures the remaining $18.1 billion of planned 2026 external financing - the EU Ukraine Facility disbursements, the ERA loan tranches, and any new U.S. action on the June House bill. Second, the winter energy picture: if Russian strikes knock out enough generation to force emergency spending, the deficit math worsens and the financing gap widens. Third, the U.S. political calendar: the House bill needs the Senate and the president, and any delay pushes Ukraine closer to the "financial tragedy" that parliamentary finance committee head Danylo Hetmantsev warned could arrive as early as April.
For defence and reconstruction exposure, the signal is different. European rearmament and NATO members' rising defence budgets support contractors with order books already filled by Ukraine-related demand and stockpile replenishment - a structural trend that survives Kyiv's political cycles. Ukrainian reconstruction-linked assets, by contrast, are optionality on a postwar state that must first prove it can fund itself. The election question does not change the defence thesis; it widens the discount on the reconstruction thesis.
Three scenarios frame the path. In the base case, martial law continues, elections stay deferred, and Western financing arrives in tranches that keep Ukraine solvent but perpetually negotiating - a muddle-through that supports defence contractors and keeps Ukrainian eurobonds trading on headline risk. In the upside case, a durable security framework and a multi-year financing commitment lock in the fiscal path, allowing reconstruction instruments to reprice. In the downside case, aid stalls below the $27.4 billion threshold, the hryvnia comes under pressure, and the governance question returns with more force - possibly through the street rather than the ballot box.
Zelenskiy's warning that a wartime election would "destroy" Ukraine is, in the end, a statement about sequencing: win the war, then renew the mandate. The market's verdict will depend on whether the money arrives first.
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