Improvement of defense capabilities of Ukraine and reallocation of military fee

It looks like the whole establishment is busy meeting high-ranking foreign guests that arrive one after another in Kyiv these days. Still, some important things besides diplomacy have also been done. The President found time to visit the Verkhovna Rada and outlined his plan to strengthen the Armed Forces of Ukraine with one decree. A group of MPs, from their side, proposed to use revenue from the military fee for military needs.

Urgent measures to improve the defense capabilities of the state

Presidential decree # 36/2022

Decision-maker: the President.

Who is affected: the Cabinet, the Ministry of Defense, and the Armed Forces of Ukraine.

Summary of the decree:

Gives the following orders to the Cabinet:

1. to ensure that the security and defense sector will get 5% of projected GDP (3 percent out of these 5 should be allocated for the needs of defense) in 2023-2025

2. to prepare the following draft bills:

• to provide pay raise for the military in 2022

• to gradually increase the strength of the Armed Forces by 100,000 service members within the next three years

• to introduce a system of intensive military training to replace compulsory military service

• to abolish conscription from January 1, 2024.

Gives the following orders to the Ministry of Defense:

• to develop a plan for a gradual transition to professional military service

• to make military contracts long-term

• by 2023, to ensure that remuneration for service members under long-term military contracts is no less than three living salaries total

• to speed up the development of a program to provide housing for the military

• to introduce a transparent system of career advancement.

What is wrong:

• the decree is unconstitutional since the President has no authority to give any orders to the Cabinet

• to give a pay raise for the military in 2022, the Cabinet will have to make significant changes to the government budget adopted only months ago. It is a bad practice to interfere with budgetary planning this way

• to abolish conscription is a populist order since no state engaged in a continuous war or under a threat of invasion can recruit the army relying solely on contracted service members. There will be fewer potential candidates due to high risks and the economy cannot offer sufficient remuneration to maintain the necessary numbers

• the state has no money to increase the strength of the Armed Forces by 100,000 in three years or to maintain such an army. Ukraine already spends near 5% of its GDP on the security and defense sector and will hardly be able to significantly increase the share in the nearest future

• longer contracts will result in fewer candidates for professional military service and the retirement of those service members that will decline to sign new longer contracts.

Alternative solution:

• to exercise his authority, the President should prepare draft bills without the help of the Cabinet. He has the right to initiate legislation and is responsible for the overall management of the security and defense sector

• include a pay raise for the military in the government budget for the next year before the budget is adopted

• introduce a modern approach to compulsory military service, make it a mandatory prerequisite for some of the positions within civil service and state-owned enterprises

• allocate available financial resources to enhance the living conditions of military members and rearmament.

Reallocation of military fee revenue for defense needs

Draft bill # 6566 of January 28, 2022

Cosponsors: Volodymyr Tsabal and 8 MPs from Holos faction.

Who is affected: Ukrainian citizens, the Ministry of Finance, the Ministry of Defense, and the Armed Forces of Ukraine.

Background: after the aggression of the Russian Federation against Ukraine started in 2014, Ukraine introduced a military fee. Revenue from it (almost ₴27 bln in the previous year) is incorporated into the General fund of the government budget.

Summary of the bill:

• excludes the military fee from the revenue of the general fund of the government budget

• allocates revenue from the military fee to the special fund of the government budget that will serve the needs of the Armed Forces and renovation of military equipment.

What is wrong:

• the bill does not propose additional sources of revenue and does not make any cuts to the general fund of the government budget after the revenue from the military fee is excluded. This will result in a deficit of more than ₴20 bln in the general fund of the government budget in 2022

• to provide funding for the Armed Forces and renovation of military equipment from a special fund increases corruption risks and inefficient use of public money: military procurements are classified and a plan for such procurements is very flexible.

Alternative solution:

• for draft bills on the reallocation of funding for a particular sector, it is necessary to indicate either additional sources of revenue or cuts for particular budget items

• to adjust the proposed spending on the development of the Armed Forces with the needs of the state defense acquisition.