The fund will make direct investments into the equity of companies developing defense technologies or technologies with dual use, a statement said.

It will mainly invest in companies operating in Estonia to alleviate excessive risks so the companies are attractive for private capital.

The detailed terms and conditions of the fund will be developed by the Ministry of Economic Affairs and Communications and the government plans to discuss them in July.

Kallas said this will strengthen Estonia's security and help boost the economy. The fund will help Estonian defense industry companies to develop and bring their products to the market.

"Estonia has a very highly developed technology sector, but there is a market failure in the use of this capacity to increase our national security. The state can help with seed funding here," she said, adding it will also create jobs.

Minister of Defense Hanno Pevkur (Reform) said this is a "great and positive step" for the local defense industry and the strengthening of Estonia's defense capacity. It can also help Ukraine.

"It is important to us for our products to reach Ukraine where they can be put to use today, while we can gather valuable experience on the battlefield," he said.

Minister of Economic Affairs and Information Technology Tiit Riisalo (Eesti 200) said this will help double the volume of the Estonian economy by 2035.

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