Parliament approved in first reading amendments to the 2026 State Budget to strengthen Ukraine’s defence capabilities

The Verkhovna Rada of Ukraine has approved in the first reading the draft law on amendments to the Law of Ukraine “On the State Budget of Ukraine for 2026” regarding the financial provision of the security and defence sector (Draft Law No. 15224).

The amendments are linked to the anticipated receipt of substantial financial assistance from the European Union amounting to EUR 45 billion in 2026 and are primarily aimed at strengthening Ukraine’s defence capabilities amid Russia’s ongoing full-scale aggression.

Why are the amendments needed?

The European Parliament recently approved the Ukraine Support Loan package, providing up to EUR 90 billion in critical financial assistance to Ukraine over 2026–2027.

In 2026, Ukraine is expected to receive the first tranche of this support package amounting to EUR 45 billion (approximately UAH 2.221 trillion at the projected average annual exchange rate), including:

• EUR 13.2 billion for budget support to finance social and humanitarian expenditures;
• EUR 31.8 billion to support Ukraine’s security and defence needs.

To ensure these funds can be legally allocated and utilized for their intended purposes, the Ministry of Finance prepared the corresponding amendments to the State Budget, which were subsequently approved by the Cabinet of Ministers.

Additional budget revenues

The proposed amendments increase State Budget revenues by UAH 2.291 trillion, bringing total revenues to nearly UAH 5.196 trillion. The increase will be generated from three sources:

• UAH 2.221 trillion from EU financial assistance under the enhanced cooperation mechanism;
• UAH 47.7 billion from additional revenues linked to the implementation of the Ukraine Plan under the EU’s Ukraine Facility;
• UAH 22.6 billion from higher personal income tax revenues resulting from increased military remuneration.

In addition, principal spending units submitted proposals to reduce expenditures by UAH 276.3 million in line with a protocol instruction of the Cabinet of Ministers.

Lower budget deficit

Thanks to the significant volume of external support provided in the form of grants, the State Budget deficit is projected to decrease by UAH 651.5 billion — from 18.5% of GDP to 12.1% of GDP, representing a reduction of 6.4 percentage points.

Increased funding for security and defence

The central feature of the amendments is a substantial increase in funding for the security and defence sector.

Total additional allocations amount to UAH 1.56 trillion, bringing overall funding for security and defence in 2026 to UAH 4.367 trillion.

The additional resources will be directed to three key areas:

• UAH 174.3 billion (total allocation: UAH 1.454 trillion) for military personnel remuneration;
• UAH 1.371 trillion (total allocation: UAH 2.297 trillion) for weapons and military equipment, including procurement and maintenance of military hardware, armaments, and ammunition;
• UAH 14.6 billion (total allocation: UAH 213.6 billion) for a reserve dedicated to security and defence needs.

The draft law approved in the first reading also introduces two important innovations: Starting from 1 July 2026, proceeds from the military levy will be credited to the Special Fund of the State Budget and directed toward remuneration of members of the Armed Forces of Ukraine.

At the proposal of the Ministry of Defence, revenues from export duties on military and dual-use goods, once introduced, will be allocated to the procurement and modernization of weapons, development of Ukraine’s defence-industrial base, deployment of advanced technologies, and support for military personnel.

Strengthening regional resilience ahead of winter 2026/27

The amendments introduce a new budget programme allocating UAH 40 billion for the implementation of Comprehensive Regional and Municipal Resilience Plans.

The programme aims to protect communities from potential attacks on critical energy infrastructure, ensure a stable heating season in autumn and winter 2026/27, and guarantee uninterrupted delivery of essential public utilities.

Funding will be directed toward:

• engineering protection of critical infrastructure facilities;
• decentralized heat generation, including modular boiler systems;
• decentralized electricity generation, including cogeneration units;
• backup power supply systems for heating and water utilities.

Additional resources for the Reserve Fund

The draft law also provides an additional UAH 40 billion for the State Budget Reserve Fund.

These resources will be used to finance unforeseen measures during martial law, including response and recovery efforts following emergencies caused by Russia’s armed aggression.

Next steps

The Verkhovna Rada Committee on Budget, together with the Ministry of Finance, will prepare the draft law for second reading under an expedited procedure.

Following final parliamentary approval, presidential signature, and official publication, the amendments will enter into force, allowing the Government to immediately begin financing newly introduced and expanded expenditure programmes, particularly those aimed at strengthening Ukraine’s defence and resilience.