Amendments to the 2026 State Budget: Parliament adopted the draft Law in the second reading

The Verkhovna Rada of Ukraine has adopted in the second reading and as a whole the draft Law on Amendments to the Law of Ukraine "On the State Budget of Ukraine for 2026" regarding the financial support of the security and defense sector (No. 15224).

The amendments are linked to the planned receipt of financial assistance from the European Union amounting to EUR 45 billion and are primarily aimed at strengthening Ukraine’s defense capabilities.

Rationale for the amendments

The European Parliament has approved a package of decisions providing Ukraine with critical financial assistance under the Ukraine Support Loan instrument, totaling up to EUR 90 billion for 2026–2027.

In 2026, Ukraine’s State Budget will receive EUR 45 billion (UAH 2.221 trillion at the average annual exchange rate), including:

• EUR 13.2 billion in budget support for social and humanitarian needs;
• EUR 31.8 billion to strengthen the country’s security and defense capabilities.

To ensure that these funds are legally incorporated into the budget and can be used for their intended purposes, the Ministry of Finance prepared the relevant amendments to the State Budget, which were approved by the Cabinet of Ministers.

The amendments provide for an increase in State Budget revenues for 2026 by UAH 2.291 trillion (bringing total revenues to nearly UAH 5.196 trillion), driven by three sources:

• EU financial assistance under the Ukraine Support Loan – UAH 2.221 trillion;
• Additional revenues generated through the implementation of the Ukraine Plan under the EU’s Ukraine Facility initiative – UAH 47.7 billion;
• Higher personal income tax revenues resulting from increased military personnel remuneration – UAH 22.6 billion.

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

How will the budget deficit change?

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

How will the funds be used?

Security and Defense

The key change is a substantial increase in financing for the security and defense sector. Funding will rise by UAH 1.56 trillion, bringing total resources allocated to security and defense to UAH 4.367 trillion.

Additional funding will be allocated across three main 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 repair of military equipment, weapons, and ammunition;
• UAH 14.6 billion (total allocation: UAH 213.6 billion) for the security and defense reserve.

The adopted law also introduces two important innovations:

1. Beginning July 1, 2026, revenues from the military levy will be credited to the special fund of the State Budget and directed toward remuneration of servicemembers of the Armed Forces of Ukraine.

2. At the proposal of the Ministry of Defense, revenues from export duties on military and dual-use goods, once introduced, will be directed toward the procurement and modernization of weapons, development of the defense-industrial complex, implementation of new technologies, and remuneration of military personnel.

Comprehensive regional resilience plans

A separate new budget program allocates UAH 40 billion for the implementation of Comprehensive Regional and Municipal Resilience Plans.

The primary objective is to protect citizens from the consequences of potential attacks on energy infrastructure, ensure the stable passage of the 2026/27 autumn-winter period, and guarantee uninterrupted provision of utility services.

Funding will be used for:

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

Reserve Fund

An additional UAH 37.2 billion will be allocated to the State Budget Reserve Fund. These resources will be used to finance unforeseen measures under martial law, including the response to emergencies caused by the armed aggression of the russian federation.

What comes next?

Following signature by the President of Ukraine and official publication, the law will enter into force, allowing immediate financing under the newly established and increased budget appropriations.