Ukraine plans big rise in defence spending in 2024 draft budget

KYIV (Reuters) -Ukraine’s government approved on Friday a draft budget for next year, planning for higher defence spending and counting on continued Western financial support to cover the expected deficit.

The draft 2024 budget puts the deficit at 1.548 trillion hryvnias ($42 billion) or at about 20.4% of gross domestic product.

More than half of all planned Ukrainian budget spending next year, or 1.7 trillion hryvnias, is planned for the defence sector to fund the war effort against Russia, which launched a full-scale invasion in February 2022.

“The key focus of this draft is defence and security of our country,” said Prime Minister Denys Shmyhal. “This amount (defence spending) is 113 billion hryvnias more than this year. There will be even more weapons and equipment. More drones, ammunition, missiles,” he wrote on the Telegram messaging app.

The finance ministry said in a statement that spending on defence was expected to be more than 21% of gross domestic product. The spending includes an allocation of 48.1 billion hryvnias for buying drones, which have been widely used by both sides in the almost 19-month-old war.

The forecast for budget financing provides for reduction of the deficit to 20.4% of GDP from 27% in 2023, the ministry said.

Finance Minister Serhiy Marchenko said he hoped for continued Western financial support. Since the start of the war almost 19 months ago, Ukraine had already received nearly $62 billion in foreign aid.

“In terms of working with partners, the road is long. The work continues. For 2023 we have secured the financing in full. I think and hope that for 2024 we will agree on support from our partners,” he said in televised comments.

Public debt repayment is planned to be 606.5 billion hryvnias, including 421.6 billion hryvnias to be spent on internal debt repayments and 184.9 billion hryvnias for external debt repayments.

Budget revenues are expected to be 1.56 trillion hryvnias. About 468.8 billion hryvnias is budgeted for social spending, and 30.8 billion hryvnias allocated for business support.

The budget draft also envisages GDP growing by 5% in 2024 to reach 7.824 trillion hryvnias.

The draft has yet to be approved by parliament.

($1 = 36.9290 hryvnias)

(Reporting by Yuliia Dysa, Olena Harmash and Anna Pruchnicka, Editing by Timothy Heritage and Hugh Lawson)