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Ukraine to boost defense production sevenfold in 2024 budget plan

On 15 September 2023, Ukraine’s Cabinet of Ministers submitted to the parliament the draft budget of Ukraine for 2024. The priority is security and defense. In particular, state investments in the defense sector are increasing sevenfold and will likely be approved by the parliament.
A batch of 122-mm artillery ammunition delivered by Ukroboronprom on 11 April 2022. Photo by Ukroboronprom

The draft budget proposes funding for the defense sector at the level of UAH 1.6 trillion ($44 billion), which is more than half of all budget resources or 21.6% of Ukraine’s GDP.

In particular, financing the development of the defense-industrial complex, which the Ministry of Strategic Industry directly supervises, will increase sevenfold — to UAH 55.8 billion ($1.5 billion). This money doesn’t include direct spending on weapons purchase but costs specifically allocated for developing the production.

The main focus is the production of weapons within the country, both at state enterprises of the defense conglomerate Ukroboronprom and by private manufacturers.

This is the right investment by the state in victory and economic recovery. These funds will be used for the development of existing production facilities and the launch of new ones. Together with the Minister of Defense Rustem Umerov, we will work on the localization of the production of weapons and military equipment,” said Oleksandr Kamyshin, Ukraine’s Minister of Strategic Industries.

Separately, the government also plans to allocate UAH 46 billion ($1.2 billion) for the Army of Drones, which means domestic production of drones in Ukraine.

Local budgets will also be cut in favor of the military. Income taxes from the salaries of soldiers will now be allocated to the national defense budget, a shift from the previous policy where they were directed to their respective municipalities. Ukraine has over 1 million military servicemen.

In total, the Cabinet planned Ukraine’s budget spending for 2024 at the level of more than UAH 3.3 trillion ($89 billion). Nearly 55% of the sum will be collected by taxes, while borrowings, grants, and some other minor income sources, such as the privatization of state-owned and confiscated Russian property, will cover the rest. The budget deficit in 2024 is expected at the level of 20,4% of GDP, down from 27% in 2023.

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