Armed Forces

Poland Boosts 2021 Defence Budget by More than 1.5 billion

The Ministry of Finances announced that Poland’s budget is to be amended, with an increase of defence expenditure of PLN 6.3 billion, or approx. USD 1.6 billion (12.2%). This means that the GDP share of defence spending could be around 2.4% or higher.

The release issued by the Ministry of Finances reads: National defence expenditure planned in an amount of PLN 51.8 billion would be increased by 6.3 bn. zlotys, up to the level of 58.1 billion zlotys (12.2% increase). The extra funds are going to be used to continue the modernization and increase of the operational capabilities of the military.

This year's initial plan for the defence budget envisaged an amount of PLN 51.8 bn. - this was to constitute 2.2% of GDP, in line with the Budgetary Act. The amendment bill envisages an increase of the aforesaid amount by 6.3 billion zlotys, up to the level of PLN 58.1 billion.

The amendment bill has been accepted by the Council of Ministers - then it would be processed at the parliament. The assumption of the amendment assumes that budget income would be much higher (484 billion zlotys, as opposed to 404.5 billion) since the economy is in better shape than expected. This would make it possible to increase spending, with additional 37 billion zlotys. The remaining "extra" income would be used to reduce the PLN 40.4 bn. deficit.

This is yet another time that the government decided to adopt a similar solution. Back in 2018, the defence spending was increased, to maintain the assumed 2% of GDP, with the economic growth being faster than expected. Thanks to the above, it was possible to allocate PLN 1.6 billion to the Wisła air defence system. In 2020 the defence spending was increased via an amendment, from 49.9 to 52.9 billion zlotys. The extra funds were used to finance the Wisła system as well.

Last year this was used as a kind of a security measure, preventing the slower economic growth in the upcoming years, expected because of the pandemic. This year, considering the acceleration of the GDP growth (from 4.0 to 4.9%), the financing of defence has been significantly increased, also when it comes to its GDP share. Considering the significant spending growth, one may expect that the GDP share would exceed the level of 2.4%, and might be as high as ca. 2.44%.

So far the Ministry of Finances did not make any announcements specifying the purpose of extra funds in the defence budget. It cannot be ruled out that the planned spending would depend on the contracts that could be successfully signed by the end of this year, or in early 2022, should they become a part of the so-called permanent expenses.