The proposed Hr 101.4 ($3.6 billion) military budget for 2019, the highest ever, is still not enough to meet all of the needs of a military at war, Ukrainian Defense Minister Stepan Poltorak told the cabinet on Nov. 14.
“We face lots of challenges today,” the minister said during the regular weekly meeting of the government.
He made it clear that Russia’s war against Ukraine, entering its sixth year in February, is taking its toll on the military. Russia controls 7 percent of Ukraine’s territory, including the Crimea and parts of the two eastern oblasts of Donetsk and Luhansk.
He also made it clear that government funding is far too little to meet the extraordinary defense challenges facing the country. According to Poltorak, the budget of the Armed Forces in 2018 was only 60 percent of the Hr 143 billion ($4.9 billion) amount requested by Defense Ministry.
“The continuing hostilities took up significant funds. Some 40,000 military personnel (deployed at the front) are losing their health or lives, and, as I believe, there can be no higher priority than the procurement of new weapons and military hardware. However, the financial resources proposed for procurement won’t allow us to acquire the full amount of hardware we need on the front line.”
Poltorak added that the proposed spending on defense in 2019 was not enough to cover all expenses on fully maintaining the 25 combat brigades formed over the past few years.
“There are also a lot of problems with allocating funds to build up reserve supplies in the case of overt aggression (from Russia),” the minister said.
He said the serious funding shortages were one of the reasons for the series of fires and explosions at the army’s strategic munition depots that have taken place over the past few years in Ukraine.
“This has long been a problem,” he said. “It hasn’t been resolved for years. Most of the bases and arsenals where the emergencies happened were subject to cuts. Moreover, the proper amount of resources was never allocated, and the respective (government) officials did not order the moving of these munitions to other bases.”
Funding for the guarding and improvement of military depots remains completely insufficient, Poltorak said.
“For the second year in a row we’ve got Hr 500 million ($18 million),” he said. “Hr 500 million is envisioned for next year. That’s not even enough to finish the construction of the 15 new warehouses we started this year. But we also planned to build another three arsenals, and we would need (even more funding) to make sure they were operational.”
Because of the underfunding of depot maintenance, Ukraine is losing expensive munitions that are difficult to produce, and as a consequence of the explosions the country also has to spend millions more on repairing infrastructure, Poltorak said.
He noted that in line with the National Security Law approved on June 21, Ukraine is to spend annually at least 5 percent of its gross domestic product on defense and security, including at least 3 percent of GDP on the military.
However, Poltorak said, the proposed funding for the Ukrainian Armed Forces would not meet this 3-percent minimum, and he urged the government and President Petro Poroshenko to discuss the possibility of increasing defense spending in the 2019 state budget.
According to the draft bill on the 2019 state budget submitted to the Verkhovna Rada on Sept. 15 and approved at first reading on Nov. 14, the Ukrainian defense and security sector will have a total budget of Hr 209.5 billion ($7.45 billion) next year.
In particular, the Defense Ministry alone was expected to get Hr 101.4 ($3.6 billion) — an increase of 15 percent compared to the Hr 86 billion ($3 billion) it had to spend this year.
Most of these funds (Hr 81.6 billion or $2.9 billion) are to be spent on army training, maintaining army units, medical support, and veteran care.
Hr 16.9 billion ($610 billion) is planned to be spent on equipment and weapons.
All of the other main security agencies also saw their funding rise — by between 10 and 20 percent.
The Interior Ministry is expected to get Hr 82.3 billion ($2.9 billion), which is an increase of approximately 20 percent compared to 2018.
The ministry’s spending plan next year envisages Hr 29.5 billion ($1 billion) for the National Police, Hr 12.4 billion ($445 million) for the National Guard, and Hr 10.8 billion ($390 million) for the State Border Service.
The country’s spy agencies will also all enjoy higher budgets: Hr 2.7 billion ($97 million) for the Chief Directorate of Intelligence, the main military intelligence body, which is subordinated to the Ministry of Defense, Hr 9.4 billion ($340 million) for the SBU, the domestic security service, and nearly Hr 2 billion ($72 million) for the Foreign Intelligence Service.
Besides, the draft bill also proposed to allocate Hr 161.1 million ($5.7 million) to the Ministry of Social Policy’s veterans care agency, which conflicts with parliament’s earlier plan to establish a brand new Ministry of Veteran Affairs starting from 2019, and to provide financing for the body in the new budget — there’s no mention of the new ministry in the current draft budget.
If approved, the 2019 defense and security spending would set a new record high: 21.1 percent more than the Hr 165.3 billion ($6.1 billion) allocated in 2018.
Next year’s defense and security budget will probably come in at 5.67 percent of the country’s GDP next year, which the International Monetary Fund (IMF) has forecast at $132.93 billion.
However, the Defense Ministry’s share is approximately 2.75 percent of the expected GDP — a quarter of a percent less than the expected minimum.
Following Poltorak’s address to the cabinet, lawmaker Iryna Friz spoke in support of increasing the military spending to at least 3 percent of GDP.
“There can no argument in favor of decreasing (defense spending) in the wake of the Kremlin’s aggression,” Friz wrote on her Facebook page late on Nov. 14.
“Hopefully, this … underfunding of the Armed Forces in the budget is nothing but a case of administrative shortsightedness, quite possibly triggered by the electoral turbulence of 2019. Unfortunately, underrating risks and threats could lead to irreparable harm to the state.”
But Oleksandr Turchynov, the secretary of Ukraine’s National Security and Defense Council, appears much more optimistic about the new defense budget. On Nov. 15 at the Kyiv Armor Plant, Turchynov said that the increase in spending in 2019 would boost the production and delivery of new weapons and vehicles to Ukraine’s defense and security forces.
Mykhailo Samus, the deputy director of the Center for Army, Conversion and Disarmament Studies, a Kyiv-based defense think tank, also reckons the proposed defense spending for 2019 is more-or-less right.
“It’s normal for a defense minister to want a higher budget for the military,” the expert told the Kyiv Post. “It’s a usual thing for state budgeting in general.”
“But at the same time, we have to admit that the proposed spending is calibrated to the country’s current economic output and financial constraints. It is a record-high amount, and it allows, in particular, us to allocate at least $600 million to defense procurement next year. We believe this is the optimal amount, which balances our needs and our (financial) capabilities for the military buildup.”
Samus added that the funding shortfall in the military could be cut drastically by reducing waste — something that not only Poltorak’s ministry, but also on the whole government should focus on.
“A primary example is the lack of effective management in defense production and procurement,” Samus said. “For years, the government has failed to create a united agency to manage this area properly. It’s failed to open it up to private and foreign contractors, who would bring in better management and new technologies.”
“This would seriously reduce expenses on military procurement — and would have a positive effect on the Defense Ministry’s budget,” Samus said.
“And the millions saved could in turn have been spent on looking after the troops better, which should always be the number one priority.”
