Petro Poroshenko said that a "constant military threat will hang over Ukraine" for the foreseeable future.He was speaking ahead of a large military parade in the capital Kiev.
Meanwhile, fighting continues in eastern Ukraine, where more than 2,000 people have died in recent months.
Mr Poroshenko said the investment would be spread out over two years, from 2015-2017.
"The events of the last months have for us turned into a real war, albeit an undeclared one," he said in a televised speech on Ukrainian independence day.
"Over the last six months, a new Ukrainian army has been born in heavy and exhausting fighting," he said.
The military parade featured hundreds of marching servicemen and military hardware. Critics said it was inappropriate when Ukraine was at war.
Continued fighting
Pro-Russian rebels in the eastern city of Donetsk - the scene of the heaviest fighting - say they will hold their own parade and display captured soldiers.More than 330,000 people have fled their homes because of fighting in eastern Ukraine.
The bodies of six civilians, including a child, were seen by an AFP correspondent in Donetsk on Saturday.
Prayers and wreaths
On Saturday Kiev marked the Day of the National Flag. Sunday's independence events include a parade involving military hardware and several hundred service personnel.
A naval parade is also being held in the port of Odessa.
These are the first military parades since 2009, when the previous pro-Russian president, Viktor Yanukovych, abolished them.
Prayers were said and wreaths laid for those who fought on the Ukrainian government side, including those killed during protests against Mr Yanukovych in Kiev last winter.
Meanwhile, security officials quoted by Ukrainian media said that five people accused of planning attacks on bases for pro-government volunteers in the Kiev area, timed to coincide with the celebrations, had been arrested.
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