President Francois Hollande said the decision was made to ensure the army can tackle problems at home and maintain missions abroad, notably in Africa and the Middle East.
"France is facing big threats internally and externally," Hollande told reporters on Wednesday after a defense cabinet meeting.
"Security, protection and independence are principles that are not negotiable."
Paris had previously said it would keep its annual defense budget at the same level — $34.5 billion (31.4 billion euros) — in its strategic review running from 2014 to 2019. This spending freeze meant the projected loss of 34,000 jobs in the armed forces, but Wednesday's decision will allow some of those positions to be saved.
President of France says he will increase military budget by 3.8bn Euros. Surely that puts It ahead of UK on #defence spending?— Jonathan Beale (@bealejonathan) April 29, 2015
Disputed Mistral Deal With Russia
Russia and France are said to be close to reaching an agreement for Paris to cancel a frozen contract on the sale of Mistral helicopter carriers and reimburse Moscow, according to a Russian source close to the talks, Reuters reported last week.
France suspended the delivery of the warships last year after the European Union decided to impose sanctions on Russia over the separatist conflict in neighbouring Ukraine.
French President Francois Hollande, who held talks with Russian President Vladimir Putin in the Armenian capital of Yerevan on April 24, suggested that Paris could cancel the contract and reimburse Moscow. Putin had said the previous week that Moscow would not impose penalties on France over the $1.29 billion deal if all costs incurred by Russia were reimbursed.