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Kyiv Eyes Hike In Defense Spending As Peace Talks With Moscow Loom

Ukrainian Prime Minister Oleksiy Honcharuk (file photo)
Ukrainian Prime Minister Oleksiy Honcharuk (file photo)

As Kyiv seeks to meet Russia, Germany, and France by the end of the month for talks on the armed Donbas conflict, Ukrainian Prime Minister Oleksiy Honcharuk unveiled the first draft of next year’s state budget that foresees a 16 percent spike in defense spending.

Speaking at a briefing with Finance Minister Oksana Makarova on September 15, Honcharuk said defense spending would reach $8.7 billion when taking into consideration the 2020 budget’s currency exchange rate of 28.2 hryvnyas per U.S. dollar.

Since April 2014 Kyiv has been embroiled in a war with Kremlin-backed separatists who, according to monitors from the Organization for Security and Cooperation in Europe (OSCE), have been equipped with the latest Russian weaponry.

In August 2014, then-President Petro Poroshenko’s administration introduced a 1.5 percent automatic deduction from monthly salaries to contribute to the defense budget as Kyiv sought to upgrade its outdated Soviet-style army and confront a foe who was at times better equipped.

Ukraine last year purchased U.S.-made Javelin anti-tank missiles.
Ukraine last year purchased U.S.-made Javelin anti-tank missiles.

Current President Volodymyr Zelenskiy’s administration has indicated that it wants to cancel the mandatory defense budget deductible. It’s not clear whether the current draft of the budget includes such a provision.

Honcharuk said the budget has been registered with parliament and should be worked over by November 2.

“We’re focusing on security and defense, infrastructure and quality road repairs, and put the individual at the front and center of the state’s development -- we need to finish reforming education and health care,” Honcharuk said.

Ukraine has to service nearly $18 billion of debt next year and is looking to earn $200 million from the sale of state-owned assets.

Honcharuk will also revise economic forecasts in October before he expects parliament to vote on the budget in its second and final reading on November 2. Parliament will debate the budget in its first reading this upcoming week.

The International Monetary Fund is visiting Kyiv this month to assess the new government’s policy intentions. Ukraine is seeking a longer-term lending program to replace the current $3.9 billion package that expires at the end of the year. Only $.1.4 billion has been disbursed in the current program.

With reporting by Novoye Vremya, Ukrayinska Pravda, and Bloomberg
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