By Olena Hrazhdan
Ukraine’s Ministry of Finance submitted a draft of state budget changes to accommodate the defense ministry’s request for an additional Hr.400 billion ($9.7 billion) in war-related expenditures.
Almost a year ago, the Defense Ministry asked for the same spending increase.
To find extra cash in 2024, finance minister Serhiy Marchenko negotiated the increase of military levy with Ukrainian lawmakers, and the law came into power. Ukrainian banks, at the same time, bought more government bonds upon the unofficial authorities request.
2025 is different. It will be hard to convince Ukrainian lawmakers to increase taxes, such as the VAT tax. “We were trying to suggest the VAT increase, but negotiations failed,” a source in the Ministry of Finance source told Kyiv Post back in 2024.
With conventional options exhausted, the Finance Ministry is now turning to budget reallocation as its primary tool.
General figures for state budget amendment plans
For the second half of 2025, Ukraine’s Ministry of Finance plans to increase spending by 8.44%, compared to plans in the first half of the year. At the same time, budget revenues will also increase by 6.34%.
The amendments to the 2025 State Budget in Ukraine, prepared for discussions in Ukraine’s parliament. Image: Kyiv Post.
The Ministry of Finance also raised the ceiling of the budget deficit, which is a decision dictated by utilizing the loan backed by Russian assets. Ukraine would not need to return either the principal or the interest of the loan, but its design requires adjusting formal debt regulations.
The key sources for finding extra revenues are planned to be an increase in future tax revenues by Hr.147.5 billion ($3.545 billion), according to Ekonomichna Pravda.
Another major source of cash for the ministry is an increase in the domestic borrowing by Hr.184.9 billion ($4.449 billion). Thus, Ukraine’s domestic borrowing for 2025 will be up by 32%, from Hr. 579.2 billion (almost $14 billion) to Hr.764.1 billion ($18.3 billion), in the current version of the budget.
Trimming Ukraine’s budget spending
Among all amendments to this year’s state budget, Ukraine’s finance ministry became the champion in saving the cash for the country. In summer 2024, Ukraine renegotiated the $20 billion Eurobond debt, also triggering the negotiation process on GDP warrants – securities linked to Ukraine’s economic growth and established in 2015.
Unlike successful negotiations of the Eurobond debt, talks about GDP warrants stalled and Ukraine decided to skip a $665 million scheduled payment on the securities.
As the government submitted changes to the budget, saving cash on not paying GDP warrants payments turned out to be the key positive change for the spending. Adding to fewer payments for Eurobonds, Ukraine’s Ministry of Finance decreased the spending for debt in 2025 by Hr.46.7 billion ($1.1 billion).
But to find less than half a trillion hryvnias for defense overall, Ukraine also decided to cut spending for: – State Special Communications Service: Hr.21.2 billion ($509.6 million) less, leaving the institution with almost no financing until the end of the year, according to Ekonomichna Pravda’s estimates.
– Ministry of Energy: Hr.240 million ($5.77 million) less
– Ministry of Agrarian Policy: Hr. 227 million ($5.46 million) less
– NABU (National Anti-Corruption Bureau) Hr.122.56 million ($2.95 million) less
– Ministry of Education: Hr.191.6 million ($4.6 million) less
Ukraine’s priority: Defense
All key defense institutions in Ukraine should get additional financing, according to the new draft of state budget amendments. The overall budget spending increase is estimated at Hr.397.5 billion ($9.552 billion).
According to the plan, the majority will be spent by Ukraine’s Ministry of Defense, comprising the figure of Hr. 338.2 billion ($8.127 billion). The Ministry will spend most of it – Hr.220.89 billion ($5.3 billion) – on military hardware. It seems technical updates for the military became so vital for the Ministry of Defense that they created a new spending article in the state budget. Ukraine will allocate Hr.26.54 billion ($638 million) for this “special equipment” source, while keeping the routine Hr.194.35 billion ($4.671 billion) spending on general military equipment. The other part of the increased budget will be allocated to the salaries of the Armed Forces of Ukraine personnel, comprising Hr.114.48 billion ($2.751 billion).
Ukraine’s Ministry of Internal Affairs, responsible for the law enforcement inside the country, managing divisions fighting in the air defense and across the frontline, will also get additional financing of Hr. 84.24 billion ($2.024 billion).
In this case, the Ministry’s budget will hit more than half a trillion hryvnias ($12.6 billion), but the sum will be split between its key subsidiaries:
the Border Guard Service of Ukraine (Hr.45.9 billion, $1.1 billion) the National Guard of Ukraine (Hr.24.5 billion, $589 million) Ukraine’s police (Hr.13.73 billion, $330 million)
Ukraine’s Ministry of Strategic Industries, responsible for state industrial and military-industrial policy, will receive extra Hr.4.5 billion ($108 million), hitting the overall spending for 2025 at Hr.59.76 billion ($1.436 billion).
Ukraine’s Main Intelligence Directorate (HUR) will also get its additional portion of cash in the amount of Hr.4.56 billion ($110 million), comprising its whole budget updates at Hr.29.7 billion ($714 billion).
The Ministry of Veterans will also get an additional financing of Hr.53.5 million ($1.29 million). Ukraine’s government also wants to boost financing of secondary education related to the military high schools (“lyceums” in Ukrainian).
But apart from military spending, there is some portion of the state budget increase aimed at civilian spending and reforms.
State budget changes: “civilian” spending and reforms
Ukraine’s Ministry of Finance outlined the increase of minimum wage for Ukraine’s prosecutors, which may also be dictated by increased inflation regularly reported in Ukraine since autumn last year.
As for the major managers of fiscal policy, the finance ministry will allocate itself slightly more cash for customs and tax reforms – significant requirements to get foreign financing from the European Union and the International Monetary Fund. Ukraine’s customs will get an additional Hr.231 million ($5.55 million), Ukraine’s Tax Service will get Hr.182 million ($4.37 million), and a special fund dedicated to first aid after natural disasters or crises will be increased to Hr.20 billion ($480 million).
Ukraine’s Ministry of Health will get an additional Hr.2.77 billion ($67 million), mainly for the state programs in healthcare. The Ministry of Digital Transformation will get a spending increase that can compete with the military, as the government wants the institution to spend Hr.6.43 billion ($155 million) more, with a total updated budget of Hr.10.6 billion ($255 million). The list of needs will include spending on: – Innovations Development Fund (Hr. 2.77 billion, $67 billion)
– a new budget program aimed at “special” innovative technologies (Hr.3.5 billion, $84 million)
– financing a newly created body to regulate the gambling market, PlayCity.
Ukraine’s key institution responsible for regional development, the Ministry for Development of Communities and Territories of Ukraine, gets a tiny additional paycheck of $5 million. This includes financing projects for energy efficiency.
The draft should now go in the parliament, as Ukraine’s lawmakers will discuss the amendments. The process may start in early July, officials familiar with the matter told Kyiv Post.