National Bank of Poland to Allocate Billions to Modernization of the Military

Head of the National Bank Of Poland, Adam Glapinski, announced that the Bank achieved a very good financial result estimated at the level exceeding PLN 10 billion. He noted, in a statement quoted by APP, that even though usually the data on the profit gained by the National Bank of Poland is released following the March audit, he decided to share this information earlier, as a new Act on Defence has been released, assuming that the profit of the National Bank of Poland - apart from 5% of the reserve fund - would be allocated to defence.

According to the Act on the National Bank of Poland remaining in force now (Article 69 section 4) "Within 14 days following the approval of the annual financial statement of the National Bank of Poland, a portion of the annual profit of the National Bank of Poland (payment derived from the profit of the National Bank of Poland) is then transferred to the state budget". The money in question becomes a part of the state budget and can be then allocated to several different purposes. The transfer derived from the profit of the National Bank of Poland is transferred in an amount equivalent to 95% of the profit of the Bank. The remaining amount is transferred to the reserve fund. This has been a long-term practice. Back in 2012, the state budget received PLN 5.2 bn. out of PLN 5.5 bn. of the profit made by the National Bank of Poland. In 2019 7.4 out of 7.8 bn. zlotys of the Bank's profit.

The bill submitted by the government - of the Act on Homeland Defence - assumes that the payments derived from the profit made by the National Bank of Poland would be paid directly to the new purpose fund - the Armed Forces Support Fund. In a situation as such the funds from the National Bank of Poland would become relevant support for the defence budget, and they would not be a part of the state budget per se.

For now, the Act on Homeland Defence is just a bill - we do not know when it's going to be adopted. Theoretically, it is possible to support the Armed Forces modernization based on the current legal framework, using the profit of the National Bank of Poland. This would happen in a situation when the amount transferred to the budget - in line with the current regulations - would be then transferred to the Armed Forces Modernization Fund, which recently was also increased with an amount of PLN 6.3 bn., based on the amendment of the 2021 budgetary act. Noteworthy, according to the Act on Homeland Defence, the assets of the Armed Forces Modernization Fund would become a part of the new Armed Forces Support Fund when the Act enters force.

If the deadline for transferring the funds from the National Bank of Poland (referring to the funds from 2021) to the budget expires before the new Act enters force, the decision to allocate this money would be made by the government, also by the Ministry of Finances and the Ministry of Defence. Now the question is whether the National Bank of Poland transfer would be indeed used to cover defence spending.