The Government of Estonia has approved the supplementary defense investment programme (KILP), raising the annual defense budget to an average of 5.4% of gross domestic product starting 2026 through 2029. For that purpose, the country will invest an additional 2.8 billion euros over the next four years, as specified in the official announcement published Thursday, April 24.
"This is the largest increase in defense spending in recent history, which will allow us to develop Estonia’s air defense faster, increase the army’s firepower, create a deep-warfare capability, and place significant emphasis on the development of drone and electronic warfare," said Estonian Prime Minister Kristen Michal.
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As noted, Estonia’s defense capabilities will be developed in line with lessons learned from the ongoing war between russia and Ukraine and NATO guidelines. Not only the nation's air force, army, and navy will be reinforced but also "the part of the defense force that you do not see in the parades – large-scale infrastructure works, cyber defense, drones, the development of electronic warfare, etc." adds Hanno Pevkur, Minister of Defense.
Pevkur also introduced the new Estonian defense industry policy for 2024–2030 to the government this week. The policy aims to strengthen Estonia's defense capability, promote economic growth, and increase the sector's competitiveness in the international market. The goal is to increase the domestic arms export to €1.4 billion and sales revenue to €2 billion annually by 2030. The industry, in return, is expected to bring 2% of Estonia's GDP and create new high-tech jobs.
Within this strategy, the government offers over 30 different measures, programs, and incentives for defense companies at each stage of their growth, such as support in raising capital, developing and testing technology, enabling production environments, and exporting. For the practical steps, the government wants to create a defense industrial park and a testing ecosystem, simplify regulations, and reduce the paperwork. Tallinn also hopes to attract investments through the European Defence Fund and NATO's DIANA program.
Worth noting, the big announcements come just a few weeks before the NATO summit, scheduled for June 24–25 in The Hague. The upcoming event has sown concern among NATO members after the U.S. administration under Donald Trump demanded that the allies boost their defense spending up to 5% and threatened that the United States may withdraw from the Alliance if others keep failing to uphold the defense commitments.
Estonia, with a years-long expenditure of 3.4% of GDP is among the few countries that made steps toward raising the figure in line with these demands, alongside Poland, Lithuania, and Finland.
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