Polish Ministry of Defence: 1.99% GDP To Be Allocated to Defence during the FY2016. More Money for the Army Soon?

As it was announced by the Media Unit of the Polish Ministry of Defence Centre for Operations, last year the defence expenditure was covered with an amount of PLN 35.744 billion, which equals to 1.99% of the GDP for the year 2015, forming the basis for planning the expenditure. Originally it was assumed that national defence should be covered with an amount of PLN 35.899 billion. 

The defence expenditure planned for the year 2016, mentioned in the Article 7 section 1 of the Act on Transformation and Modernization [...] has reached the level of 35 898 740.0 thousand zlotys, i.e. 2% of the GDP forecast for the year 2015: PLN 1 796.5 billion. The defence expenditure implemented amounted up to PLN 35 744 409.4 thousand (which is equivalent to 1.99% when compared to the value of GDP), including: section 29, National Defence - PLN 35 304 051.5 thousand (with the permanent expenses in an amount of PLN 640 214.5 thousand), and 440 357.9 thousand zlotys in the section 752, National Defence, outside the section 29, National Defence.

Procurement of the VIP aircraft for the Polish government has also borne a high degree of relevance for full implementation of the 2016 defence budget. The agreement, the goal of which is to acquire medium the medium-sized Boeing 737 aircraft was signed in March this year, which made it possible to utilize the assets contained within the 2016 budget, within the scope of so called permanent expenditure (as the assets in question were to be used by the MoD until the end of the month). Within the framework of the permanent expenditure amount, the VIP jets procurement expenditure was equal to PLN 519 665.2 thousand.– according to the Polish Ministry of Defence Centre of Operations.

Last year, the MoD managed to cover capital expenses in an amount of PLN 9.864 billion, whereas it was planned to spend PLN 10.294 billion. The contribution of capital expenditure to the MoD budget was equal to 27.6% - which is quite high, as the Act on Transformation and Modernization of the Armed Forces and on Financing of the Armed Forces requires this parameter to reach the value of at least 20%. The implementation of the capital expenditure, when compared to the original plans, has been completed in 95.8%.

The capital expenditure planned for the year 2016, in line with Article 7, section 3 of the aforesaid Act, was shaped at the level of PLN 10 293 634.0 thousand, with the Part 29 National Defence being covered with an amount of PLN 10 247 302.0 thousand, and PLN 46 332.0 thousand in section 752, with the exclusion of Part 29. Within the framework of the amount of the defence expenditure implemented (PLN 35 744 409.4 thousand), capital expenses in an amount of 9 864 860.1 thousand zlotys have seen relevant implementation, which constitutes 27.6% of the defence expenditure implemented. Within the framework of the capital expenditure, VIP aircraft procurement was covered (permanent expenditure) with the following sums: Plan - PLN 540 000.0 thousand, implementation - PLN 519.665.2 thousand.

The statement published by the MoD suggests that last year, the Technical Modernization Plan assumed that spending in an amount of PLN 9.366 billion would have to be covered, whereas after the changes introduced towards the end of the year, the planned amount was equal to PLN 9.162 billion. Ultimately, the Ministry spent PLN 9.109 billion – this constituted 99.4% of the plan after the amendments, and 97.2% of the original arrangements.  

During the year 2016, within the framework of the Technical Modernization Plan, the spending was planned in an amount of 9 365 797.0 thousand zlotys. The plan, following the changes that took place towards the end of the year, was defined by an amount of PLN 9 161 874.7 thousand, and it was implemented in an amount of PLN 9 109 275.6 thousand (99.4%). Within the framework of the amount of the amended plan and the implemented amount of expenditure contained within the Technical Modernization Plan, the expenditure related to procurement of the VIP aircraft (permanent) was equal to PLN 540 000.0 thousand, meanwhile, implementation was covered with an amount of PLN 519 665.2 thousand.

Also, the expenditure related to procurement of the VIP jet was quite important, even though this item was not included within the original budgetary bill. As it had been indicated before, the spent amount of permanent expenditure covering the said task, and related to acquisition of medium jets, was equal to almost 520 thousand zlotys.

Last year, Polish Ministry of Defence has been able to achieve 100% level of budget execution. It shall be noted that even though some important agreements were signed, including the ones related to deliveries of the Rak [Crayfish] self-propelled mortars and Regina artillery modules armed with the Krab [Crab] SPHs, acquisition of optronics, air-to-air and air-to-ground missiles for the Polish F-16 aircraft, or even of the VIP jets (contractual agreement signed on March 31st made it possible to make full use of the assets allocated to the year 2016), still the key agreements concerning the costly air defence and missile programmes have not been concluded yet – here we are referring to the medium range air defence programme, Wisła, and rocket artillery programme, Homar [Lobster], with the latter initiative aimed at procuring ground-to-ground system with a range of at least 300 kilometres.

Despite the statements made by the Macierewicz, the deliveries of the initial two helicopters for the Special Operations component also did not take place, while the procurement procedure referring to the aforesaid issue is still underway. Finally, the most major programmes pursued by the Navy modernization have not been finalized. Moreover, Zefir MALE UAV programme, tactical UAV programmes (Gryf, Orlik) and mini-class UAV programme (Wizjer) also have been put on hold, same applies to the procurement procedure related to the Rosomak BMS battle management suite.

At the moment, the Ministry declares that agreements concerning the Wisła and Homar programmes constitute a priority. Wisła medium range air defence programme may be worth up to PLN 30 billion. The representatives of the Ministry also declare that they are willing to significantly increase the quantity of personnel enlisted within the Army, according to Minister Macierewicz, the said number may reach up to 200 thousand soldiers (however, the aforesaid number, most probably, also includes the Territorial Defence component).

It is then clearly visible that the costs of maintaining such structure would be much higher than the ones that are required to be covered now, considering, especially, implementation of the modernization programmes that need to be urgently finalized. This is even more pronounced due to the fact that unpredicted purchases are also being taken into account, e.g. of anti-tank weapons – Karabela programme new ATGMs and multiple use anti-tank grenade launchers.

Both the Polish Ministry of Defence, as well as the President of Poland mutually agree that there is an urgent need to adopt an Act that would increase the planned defence expenditure from 2% of GDP referring to the preceding year, to an identical level, however calculated on the basis of the gross domestic product value for the “current” year, which, in case of positive GDP dynamics, translates into an increase of defence spending. Relevant legislation-related steps should be undertaken by the end of this year. On the other hand, the Strategy for Responsible Development assumes that defence spending at the level of 2.2% of GDP would be achieved (referring to the “current” year) until the year 2020, with an increase up to 2.5% of GDP planned to happen before the year 2030.

The implementation of the aforesaid assumptions, taken into account when the Strategic Defence Review was being developed, is going to play a crucial role for financing of the Polish Army in the upcoming years. In a situation in which introduction of the above steps would be refrained from, the Polish Army would still be modernized to a limited degree, due to the insufficient financing, and this will not be changed through initiation of one, or even several key programmes. Increase of the defence expenditure above the level of 2% of GDP is then absolutely required to implement the plans of expanding and modernizing the Polish military potential successfully. This is also the case due to the fact that some politicians and opinionmakers, including Jarosław Kaczynski, the President of the Law and Justice party which remains in power in Poland, state that defence expenditure level should be as high as 3% of GDP, which is significantly higher than the value defined as the objective of the “Strategy”.

The first steps, within the scope of raising the defence expenditure above the level equivalent to 2% of GDP, even when calculated in line with the NATO methodology (which was led to by allocation of extra funds to VIP jets acquisition), shall be taken next year, at the latest. In other case, the poor situation, within the scope of the hardware used by the Army, is going to remain unchanged.

What is even more important, the potential extra assets emerging within the process of the national budgetary plans, will be used to cover separately defined spending areas. Due to the above, systematic and significant increase of the military funding will become more and more difficult, also when one takes the periodic fluctuation of the Polish and of the global economy. The entries contained within the Strategy for Responsible Development, within the scope of the defence expenditure, need to be implemented without any delays.