A recently signed tax hike and parts of the G7's $50 billion loan will be sufficient to cover Ukraine’s defense expenses included in the 2025 budget, the Finance Ministry said on Dec. 11.
For the next year, Ukraine allocated 26.3% of its gross domestic product (GDP) to defense and security expenditures, including Hr 740 billion ($17.7 billion) for arms purchases and Hr 50 billion ($1.2 billion) on the production and purchase of drones.
Ukraine began actively developing its defense production after Russia's full-scale invasion in February 2022.
To cover the growing defense expenses, Ukraine’s government raised the war tax on personal income from 1.5% to 5% and introduced a war tax on small businesses and individual entrepreneurs.
Separately, the G7's Extraordinary Revenue Acceleration (ERA) initiative is expected to bring an additional $50 billion to Kyiv's coffers. The loan will be covered by proceeds from the roughly $300 billion of frozen Russian assets, which amount to roughly $3 billion annually over 30 years.
The U.S. announced on Dec. 10 the disbursement of $20 billion for Ukraine as part of the loan. The EU is expected to contribute $20 billion, Canada $3.7 billion, and Japan and the U.K. $3 billion each.
Only a part of these funds, namely those provided by the EU and the U.K., can be used directly to cover defense needs.
These funds "will allow to fully finance all planned expenditures of the Defense Forces in 2025,” the ministry said, adding that "meeting the needs of the security and defense sector is an undisputed priority for the Finance Ministry."
Speaking to El Pais, Finance Minister Serhii Marchenko said that Ukraine has enough arms and funds to continue resisting Russia at least until mid-2025 and possibly longer if U.S. President-elect Donald Trump cuts support after taking office.
Tim Zadorozhnyy
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