Prime Minister Denys Shmyhal revealed during a press conference that the Ukrainian military is facing a significant budget shortfall of 500 billion hryvnias (approximately $12 billion) for the current year. This financial gap has emerged due to the ongoing war and increased military needs, which were not fully anticipated in the 2024 budget planning.
The budget strain has been exacerbated by ongoing mobilization efforts and the need to fill vacancies in the armed forces. Shmyhal highlighted the cost of maintaining troops, saying, “We know that financing each of our military personnel costs the budget 1.2 million hryvnias. Accordingly, when we recruit people, we have to increase the budget of our Armed Forces.” 1.2 million hryvnias ($29,000) annually are paid to soldiers on the frontline, while rear personnel have 2-3 times smaller salaries, which are roughly comparable to Ukraine’s average income.
The government is now working on addressing this shortfall and planning for the 2025 budget, with discussions already underway with the IMF. Shmyhal described these negotiations as challenging, noting that Ukraine must finance its armed forces independently as “partners do not provide funds for the Armed Forces.”
To address the funding gap, the government is exploring various options, including domestic borrowing, tax increases, and other financial instruments. One proposed measure is an increase in the military levy, for which the Cabinet of Ministers has submitted a draft law to the Verkhovna Rada.
Additionally, the government plans to obtain 50 billion hryvnias from confiscated Russian assets in the next year, which will be used “to finance the budget deficit and for our military needs,” according to Shmyhal.
The revelation of this substantial budget shortfall underscores the ongoing financial challenges Ukraine faces as it continues to defend itself against Russian aggression, highlighting the need for sustainable funding solutions to support its military efforts.
Discussions on tax increases have gained traction as part of broader fiscal adjustments. The Ukrainian government has proposed amendments to its tax code, aiming to generate an additional 140 billion hryvnias ($3.4 billion) in revenue to help address a significant budget deficit.
The Ukrainian budget for 2024 allocates substantial resources to defense equal to 22% of the GDP, driven by the urgent needs of the ongoing war. Despite this, social spending also remains a priority, with allocations for pensions, healthcare, and education mainly covered by Ukraine’s international partners.
Additionally, President Zelenskyy and other Ukrainian officials have hinted at broader fiscal reforms and potentially higher taxes to support the war effort and mobilization needs.
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