The Ukrainian Parliament has approved a substantial increase in the country’s defense budget for 2024. The legislative body passed bill №11417, allocating an additional 500 billion hryvnias (approximately $12 billion) for military needs.
This previously deficit sum for sustaining defense against Russian aggression will be covered through increased state debt and higher taxes, due to a lack of foreign funding. However, this increased spending will not be sufficient to cover the nearly $20 billion needed annually to utilize existing defense manufacturing capacities within Ukraine fully. The government hopes to receive these funds from the EU and US to continue defending against Russian aggression and gradually outmatch Russian defense capacity.
The bill №11417 received overwhelming support, with 298 MPs voting in favor with 226 votes required. This increase brings Ukraine’s total expenditure for the year to a record-breaking 3.73 trillion hryvnias ($92 billion), underscoring the nation’s commitment to its ongoing defense efforts.
Yaroslav Zheleznyak, a member of Parliament, confirmed the vote, highlighting the unprecedented scale of the budget allocation. The additional funds will be sourced through various means, including:
- 115.4 billion hryvnias from reduced debt servicing and repayment
- 216 billion hryvnias from additional domestic government bond placements
- 100 billion hryvnias from over-performance in tax collection
- 42.7 billion hryvnias from increased taxes
This budgetary increase follows recent legislative changes, including a rise in the military levy from 1.5% to 5% of an additional income tax, new taxes for individual entrepreneurs, and an increased corporate tax rate for banks (50%) and non-banking financial institutions (25%).
Roksolana Pidlasa, Chair of the Budget Committee, explained that these tax changes are expected to bring in 58 billion hryvnias in 2024 and 137 billion hryvnias in 2025, crucial for supporting the country’s defense sector.
The approval of this substantial budget increase reflects Ukraine’s determination to strengthen its military capabilities in the face of ongoing security challenges but also brings Ukraine’s tax burden dangerously close to the overall limit.
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