Estonia approves $3.2B defense spending spike, locks in 5.4 percent GDP target

By Tim Martin — 2025

Estonian soldiers take part in a training exercise (Photo: Estonian Defence Forces)

“The government’s decision means that we are progressing faster than before in building up Estonia’s defence capabilities – that applies to the army, the air force, as well as the navy,” said Estonia’s Prime Minister Kristen Michal.

Estonia has approved a four-year defense investment plan that adds €2.8 billion ($3.2 billion) in funding as Tallinn works to meet NATO capability targets.

According to Thursday’s announcement, the “supplementary defence investment programme” will allow Estonia to allocate an average of 5.4% of its GDP toward defense through 2029.

Prime Minister Kristen Michal said the plan represents “the largest increase in defence spending in recent history,” enabling accelerated development of air defense, increased army firepower, establishment of deep-warfare capabilities, and major investments in drone and electronic warfare.

Defense development priorities will follow guidance from Maj. Gen. Andrus Merilo, commander of the Estonian Defence Forces, and align with lessons from the Ukraine war and NATO capability requirements. A NATO spokesperson noted that the refreshed capability targets remain classified.

NATO Supreme Allied Commander Transformation Pierre Vandier previously said that allies will be asked to raise capability targets by 30%, with 80% of member states already agreeing. Full agreement among all 32 nations is expected before the NATO Summit in The Hague.

Estonia’s decision follows similar moves by Lithuania and Latvia. Lithuania committed in January to raising defense spending to 5–6% of GDP, while Latvia plans to reach 5% long term. Though the Trump administration had urged European nations toward 5%, NATO is expected to agree on a more modest figure.

Major procurements under Estonia’s modernization program include:

• Over $200 million for six Lockheed Martin M142 HIMARS systems

• A potential second HIMARS order, still under evaluation due to pricing and delivery timing

• Replacement of the XA-180 APC fleet (decision pending)

• Nearly 50 Turkish-made Arma 6×6 and NMS 4×4 APCs delivered in March

• First deliveries of 12 French Caesar Mk1 155mm self-propelled howitzers in January

New air capabilities are a priority. In December 2024, the Estonian Centre for Defence Investments (ECDI) launched a tender for a seven-year loitering munitions framework covering both short- and long-range systems, aiming to secure multiple suppliers.

Ammunition stockpiles form the core of the 2025–2029 defense investment plan. ECDI forecasts entering a new procurement cycle and has earmarked:

• €800 million for large-caliber ammunition

• €300 million for small-caliber ammunition (by 2028)

https://breakingdefense.com/2025/04/estonia-approves-3-2b-defense-spending-spike-locks-in-5-4-percent-gdp-target/