Ukrainian govt proposes making defense priority of 2023 budget spending increase

MOSCOW. March 14 (Interfax) - The Ukrainian government has submitted a bill to the Verkhovna Rada, requesting a 537.2 billion hryvni increase in 2023 budget expenditures, including 518.2 billion hryvni in national security and defense spending.

As a result, this year's budget deficit is expected to grow by 419.2 billion hryvni.

"The government has supported a bill to increase state budget spending by 537 billion hryvni. We propose additionally allocating 518 billion hryvni for security and defense and another 19 billion hryvni to the reserve fund. This will help strengthen our defense capabilities," Ukrainian media outlets quoted Ukrainian Prime Minister Denis Shmygal as saying on social media on Monday evening.

Thanks to international partners' support, Ukraine has found these additional funds, Shmygal said.

"The bill envisages using these extra funds to pay salaries to service members and to purchase military and specialized hardware, equipment, etc. We are counting on the parliament's support," he said.

Ukrainian media also said, citing the government's representative to the Verkhovna Rada Taras Melnichuk that there are also plans to increase the amount of external borrowing by 180.6 billion hryvni and the amount of internal borrowing by 271.3 billion hryvni.

Remuneration and extra payments account for 477.2 billion hryvni of the proposed larger budget for national defense and security, and military hardware and equipment for 30.2 billion hryvni, Melnichuk said.

Furthermore, there are plans to add another 10 billion hryvni to the volume of state guarantees for residents of Ukraine in relation to loans that help finance programs aimed at enhancing the country's defense capabilities and security, he said.

Head of the Verkhovna Rada's Budgetary Committee Roksolana Pidlasa, in turn, said on social media that, apart from increasing the budget deficit to finance additional expenses, there is also an initiative to raise budget revenue by securing a 60.7 billion hryvni growth of income tax proceeds, VAT levied on manufactured goods and a portion of state-owned banks' net profit, to reduce spending on state debt servicing by 50.3 billion hryvni and to decrease spending on the provision of state guarantees by 6.9 billion hryvni.

"The Verkhovna Rada will debate this draft legislation without delay," Pidlasa said.

As reported, Ukraine state budget for 2023 was approved with revenues of 1.329 trillion hryvni, including 1.173 trillion hryvni in the general fund, and expenditures of 2.580 trillion hryvni, including 2.296 trillion hryvni in the general fund.

Ukraine's budget for 2023 was approved with a deficit ceiling of 1.296 trillion hryvni (or 20% of the country's projected GDP), including 1.124 trillion hryvni in the general fund. The budget deficit is expected to be financed fully by external loans in an amount of $38 billion.

In late February, the Verkhovna Rada introduced amendments to the 2023 budget, but they have yet to take effect. These amendments envisage increasing spending and loans from the 2023 budget's special fund by 5.56 billion hryvni to finance healthcare, the restoration of bridges, improvements at border crossings, low-interest loans for farmers and grants for businesses.

The sources of financing should be external loans, accompanied by the corresponding growth of the budget deficit by 3.84 billion hryvni, international grants worth 450 million hryvni and 1.28 billion hryvni of unused unemployment benefits.