Polish Defense Budget Set to Grow by Nearly 9 Percent in 2016

by Dan Darling, International Military Markets Analyst, Forecast International.

The Polish government has adopted a 2016 budgetary outline that would see the country’s year-on-year nominal defense budget rise by PLN2.876 billion ($761 million) from the 2015 earmark, amounting to an 8.7 percent increase.

The additional expenditures earmarked for defense will push Poland’s military budget up to 2 percent of GDP, bringing the country’s defense allocation in line with the NATO minimum spending requirement for the first time since the country became an Alliance member in 1999. Previously, Poland had earmarked 1.95 percent of annual GDP towards defense, holding to the Act of May 25, 2001, which mandated this level of military spending.

While this level of military spending pushed Poland to the top of the defense expenditure category among Europe’s NATO members in terms of investment per national wealth, it nonetheless proved insufficient for hastening Poland’s military modernization process. Though acquisitions such as the procurement of 48 Lockheed Martin F-16 C/D Block 52+ aircraft in 2003 helped bring the Polish armed forces more in line with Westernized NATO standards of hardware, the wholesale revamping of Warsaw Pact-era equipment has been a slow grind.

A long-term plan – the Technical Modernization Plan for the Polish Armed Forces 2013‑2022 – is currently underway, with government pledges of PLN100 billion ($26.44 billion) in investment buttressing the effort. For now, a special reserve fund allows the military to conduct its modernization regardless of economic hiccups.

In the aftermath of Russia’s takeover of the Crimean Peninsula and the subsequent (and ongoing) Kremlin efforts to support Russian separatist efforts in Ukraine, the Polish government has opted to accelerate its military modernization plans.

Prime Minister Ewa Kopacz announced in her inaugural speech on October 1, 2014, that she intended to bolster government spending on defense from 1.95 percent of national GDP to 2 percent starting in 2016, and the budgetary bill just approved follows through on that promise. Of the total PLN35.9 billion ($9.49 billion) earmarked for defense, PLN9.689 billion ($2.56 billion) will be allocated towards armed forces modernization. Another PLN899 million ($237 million) will be spent on military-oriented research and development efforts.

The acceleration of the U.S. dollar versus the local currency, the zloty, since January 2014 has mitigated Poland’s absolute buying power on the international market. The zloty has declined nearly 27 percent in value against the dollar over that time. With Poland making investments across a broad spectrum of areas – including a wholesale naval modernization effort; the construction of a national air and missile defense system (Shield of Poland); and the procurement of MALE UAVs, advanced jet trainers, and combat support helicopters – ensuring a balance between foreign-sourced equipment and investment in the domestic defense sector has now become a heightened priority for Warsaw.

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