Ukraine to Boost Defense Spending by Nearly $10B in Budget Bill

The Ukrainian government has submitted a bill to request an additional Hr.400.5 billion ($9.7 billion) for the Ministry of Defense’s war-related expenditures this year. 

The government submitted the bill to a parliamentary committee for review, with a full vote to follow. Kyiv Post’s source in the parliament said voting will take place no earlier than July 15.

Expenditures will increase by Hr 449.8 billion ($10.76 billion), Ukraine’s parliament Budget Committee Chairperson Roksolana Pidlasa wrote in her Facebook update.

The key change is an increase in defense spending. 

Ukraine prioritizes weapons, veterans in budget update

According to the bill, Ukraine will spend Hr.412.4 billion ($9.87 billion) on defense during the second half of 2025, of which Hr 215.9 billion ($5.17 billion) will go towards weapon and equipment procurement.

Ukraine’s Ministry of Digital Transformation will launch a new program in defense tech to purchase and test new solutions. This will require an additional Hr.3.4 billion ($81 million) from Ukraine’s budget. 

The ministry will also need Hr.2.77 billion ($66 million) for its Innovation Development Fund.

Local authorities will receive Hr.1.5 billion ($36 million) of additional funding to expand the network of military high schools (“lyceums” in Ukrainian).

War veterans and their families will get cash assistance and car insurance compensation from the budget, estimated to cost the state Hr.1.16 billion ($28 million) in total. 

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Ukraine will also establish the National Military Memorial Cemetery for Hr.800 million ($19 million). 

The Reserve Fund of the state budget, a special fund dedicated to crises and natural disaster responses, will be increased to Hr 18.1 billion ($433 million), according to Pidlasa. 

Kyiv also plans to redirect a third of the “military income tax” revenues previously assigned to the State Special Communications Service to defense. 

Funds from gambling and lottery license revenues, previously planned for the Education Ministry, the Healthcare Ministry, and the Youth and Sports Ministry, will also be redirected to defense. 

Ukraine adds funds for school meals, medicine, salaries

Ukraine will also increase non-military expenses aimed at social support.

The increase includes Hr.4.6 billion ($110 million) to finance school meals for all primary school students across all regions, and for grade 5 to grade 11 students in frontline areas.

Ukraine also plans to spend Hr.3.1 billion ($74 million) to procure medicines for cancer, viral hepatitis, rare orphan diseases and hemophilia. 

Ukrainian prison staff will receive additional funding for salaries, estimated to be Hr.650 million ($15.5 million) from the Ministry of Justice’s budget.

Regarding the revenues to cover additional spending, Ukraine will increase domestic borrowing and reduce spending on both domestic and external debt. 

Another source will be higher tax revenues and increased dividends from state-owned companies to the government.

According to Pidlasa, Ukraine will increase its domestic bond borrowings by Hr.184.9 billion ($4.42 billion). 

“Hr.147.5 billion ($3.53 billion) is expected from revenue overperformance and projected overperformance (primarily personal income tax, corporate profit tax, excise on imports, and higher-than-expected transfers from the NBU and state-owned companies),” Pidlasa wrote.

The state budget will receive additional funds thanks to lower debt servicing costs: Hr. 65.1 billion ($1.56 billion) for reduction in domestic bonds, Hr. 46.7 billion ($1.12 billion) reduction in interest payments and Hr. 3 billion ($72 million) reduction in expenditures for servicing state-guaranteed debt.

Other state budget spending is cut by Hr.2.6 billion ($62 million), according to Pidlasa. 

Additionally, local budgets will be allowed to use remaining funds from the state budget’s additional grants to purchase school buses and build shelters in schools, she wrote.