Ukraine Boosts Defence Budget Amid Prolonged Conflict with Russia

Ukraine's parliament has amended the 2024 budget to allocate an additional 500 billion hryvnias for defence, bringing the total budget spending to a record 3.73 trillion hryvnias. With ongoing conflict against Russia, demands for ammunition and soldiers' wages are increasing, leading to tax hikes and borrowing from the domestic debt market.

Ukraine's parliament has amended the 2024 budget to increase defence spending by an additional 500 billion hryvnias ($12 billion) as the war with Russia continues into its 31st month. Lawmaker Yaroslav Zheleznyak from the Holos party announced that total budget spending for this year has been raised to an unprecedented 3.73 trillion hryvnias ($90 billion).

Faced with the necessity to defend over 1,000 km (620 miles) of front lines, the demand for ammunition and weapons has grown, requiring additional funds. Ukraine has accelerated its mobilisation efforts and needs more resources for soldiers' wages. Most state revenues are allocated to national defence, with financial aid from Western partners funding pensions, public sector wages, and other social expenditures. The finance ministry reported an 11% rise in total spending, reaching 2.1 trillion hryvnias in the first eight months of the year.

Total military spending included around 965.8 billion hryvnias on soldiers' wages, ammunition, and equipment, according to a ministry statement. To fund the army for the rest of the year, the government plans to increase taxes and borrow more from the domestic debt market. Additionally, Kyiv has negotiated a deal to restructure over $20 billion of international debt, saving approximately $11.4 billion over the next three years. The government aims to raise the war tax on residents to 5% from the current 1.5%, and introduce new war-related taxes for individual entrepreneurs and small businesses. Parliament has initially approved these tax hikes, with a final vote expected later this month or in early October. These changes are projected to generate 58 billion hryvnias this year and 137 billion next year.

(With inputs from agencies.)