Ukraine Approves $10B Defense Budget Boost Amid Anti-Corruption Controversy

Ukraine’s Verkhovna Rada had on Thursday voted for increased defense spending, previously defined by Ukraine’s Ministry of Finance, that will enable military salaries to be paid in August. 

Acceptance of the bill to roll back the law that effectively dismantled Ukraine’s anti-corruption institutions meant that the critical military budget amendments were left untouched. 

The clock was ticking: If the amendments were not approved, the Ukrainian military would have remained without salaries in August, according to a Facebook post by Roksolana Pidlasa, head of the budget committee. 

On Thursday, Ukraine’s parliament voted on a new version of the budget amendments bill under the number 13573, which received 332 votes in favor, more than 100 more than the required 226 majority. 

The bill increased defense financing by Hr. 412.3 billion ($9.88 billion), to be allocated as follows, according to Pidlasa:

• Hr.115 billion ($2.76 billion) for all Defense Forces personnel salaries
• Hr.216 billion ($5.18 billion) for the procurement and production of weapons, military equipment, and drones
• The remainder (Hr. 81.3 / $1.9 billion) for other military needs

According to the Ministry of Finance’s press release published immediately after the positive vote, the increased spending will be allocated between all of Ukraine’s defense-related institutions actively engaged in resisting Russia’s invasion and managing Ukraine’s security activity. 

To keep the additional military inflows steady, policymakers decided to amend the distribution of the defense portion of personal income tax (PIT) revenue starting from August 1, 2025.  

Other Topics of Interest

Russia’s Economy Is Cracking: Professor Exposes It

Dr. Jason Smart and economist Volodymyr Lugovskyy reveal why Russia’s wartime economy is cracking under labor shortages, brain drain, failing energy leverage, and sanctions.

Previously, it was destined for social protection policies, but increased defense needs due to Russia’s prolonged war against Ukraine forced policymakers to redirect the cash to the military. 

The portions of PIT will be redirected as follows:

• 60% allocated to the Ministry of Defense for purchasing drones, weapons, and military equipment (an additional Hr.22.4 billion [$537 million] for the Ministry of Defense, already included in the total increased amount)
• 30% to the State Special Communications Service for drones
• 10% for brigade needs

The key reason for the changes was Ukraine’s desperate need for an extra $10 billion for salaries now – following the reallocation of these funds to purchase ammunition in the first half of the year, Ekonomiichna Pradva wrote. 

Apart from budget reallocation, Ukraine’s authorities aim to finance the additional defense spending from Ukraine’s government bonds, tax overperformance and reduction in both domestic and Eurobond debt servicing costs, according to Pidlasa’s figures: 

• Hr.184.9 billion ($4.43 billion) – increase in funds raised from government domestic bonds (OVDP),
• Hr.147.5 billion ($3.54 billion) – revenue overperformance and expected overperformance (primarily from PIT, corporate income tax, import excise + the NBU and state-owned companies remitted more than expected),
• Hr.65.1 billion ($1.56 billion) – reduction in OVDP redemption costs,
• Hr.11.2 billion ($268 million) – reduction in debt servicing costs (interest payments on borrowed funds), due to exchange rates and restructuring.

Ukraine’s authorities previously wanted to both increase the salaries of the military, opting not to finance social programs for veterans and state healthcare, judging from Pidlasa’s post and the Finance Ministry press release. 

According to both the post and the press release, there is also no mention of spending for customs and tax reforms – significant requirements to get foreign financing from the European Union and the International Monetary Fund.