Polish MoD Reveals Budget Draft for 2022

The 2022 budgetary bill issued on 24th August 2021 was handed over already, to the Social Dialogue Council. The bill is compliant with the adopted assumptions - the defence spending is set at the level of 2.2% of GDP, excluding the recently launched, long-term M1A2 Abrams SEP v3 MBT procurement programme.

National defence spending is expected to reach the level of PLN 57.783 bn in total, including:

• PLN 57.15 bn in Part 29 of the national budget: National defence;
• PLN 412.78 mn in section 752: National defence in other sections of the state budget.
• PLN 218.72 is the spending within the Armed Forces Modernization Fund, and expenditure regarding the accommodation investments made by the Military Property Agency.

For the sake of comparison, one should note that assumptions presented by Defence24.pl, concerning the year 2022, were quite similar (57.77 bn, 57.22 bn, and 340.9 mn correspondingly), with those assumptions not referring to the Modernization Fund.

The detailed division of the PLN 57.15 bn. amount is outlined in table no. 1. For the sake of comparison, the table also includes comparable amounts of the current FY2021 budget, as well as the implementation of 2020 and 2019 budgets. Expenditure would be almost globally increased in 2022, across the whole defence budget, when compared to the previous year. In total, we are talking about 11.7% growth for section 29. The highest increase of 33.7% is planned for Chapter 75211 - Cyber-security and cryptology-support.

Undoubtedly, this domain is quite crucial now - it is worth making investments in that area. Chapter 75280 is also quite interesting. It refers to R&D activities. As 2.5% of defence expenditure is statutorily required to be spent here, PLN 1.237 bn has been expected to be allocated to these matters in Part 29 alone. If the remaining Parts of the budget are included, we would be dealing with an amount of PLN 1.44 bn. Similar amounts have been defined for the 2021 budget. However, the implementation is not that efficient, as in 2019 and 2020 only PLN 127-135 million were used for that purpose.

The 2022 bill assumes, in section 29. National Defence, that the following amounts would be allocated to the specific spending areas:

• PLN 18.515 bn – capital expenditure tied to investment and investment acquisition made by the Polish MoD, and expenditure covering co-financing of the NATO investment programmes;
• PLN 14.129 bn– personnel expenditures - salary for the professional soldiers and officers, and cash consideration related to remuneration, as well as remuneration for civil personnel and teachers, along with related expenditure;
• PLN 10.618 bn - expenditure and spending to cover overhaul, healthcare, telecommunications, and remaining services, and to cover procurement of materials, equipment, hardware, and armament, energy, and food supplies;
• PLN 8.175 bn  – for retirement pay and benefits for former officers and professional soldiers;
• almost PLN 1.32 bn – to cover remaining, ongoing expenditure;
• PLN 1.867 bn – benefits for natural persons;
• PLN 2.52 bn – defence-related subsidies;
• PLN 3.77 mn– co-financed projects involving the EU.

The most significant item - the capital expenditure is defined as 32% of the general defence spending, in line with the Act issued on 25th May 2001, on Act on reconstruction and technical modernization and funding of the Polish Armed Forces.

The means in section 752. National defence, but distributed across the budget, would be used for the following purposes:

• R&D and specific purpose defence projects;
• “Non-military Defence Preparation Programme”;
• Activities of the Common Prosecutor’s Office, tied to military matters;
• Tasks resulting on the grounds of the “Economy Mobilization Programme”;
• The annual ESA fee.

Alongside the aforesaid spending, it is planned that the "Equipping the Polish Armed Forces with MBTs" long-term programme would be pursued, between 2021 and 2026. The programme in question was brought to life by a resolution issued by the Council of Ministers no. 89/2021, issued on 9th July 2021. Even though the resolution does not literally mention procurement of the M1A2 Abrams SEP v3 MBTs, it has been portrayed in this way in the statements made by the representatives of the Council of Ministers. The programme’s cost is defined as 23,300,000 thousand zlotys, with the following amounts expected to be spent per annum:

• PLN 4.8 bn. throughout the year 2022;
• PLN 4.8 bn. throughout the year 2023;
• PLN 4.8 bn. throughout the year 2024;
• PLN 8.9 bn. during the years 2025-2026.

The number of MBTs to be procured, and the numbers for the specific years remain confidential. The justification of the budgetary bill for 2022 reads:

“The goal of the programme is to increase the defence potential of the Republic of Poland by acquiring modern MBTs and the support vehicles for the Polish Armed Forces. The implementation of the Programme is dictated by the necessity to reinforce the operational requirements of the Polish Armed Forces for defence and deterrence, targeted at threats to national security, with a particular emphasis placed on heightened levels of mobility and technical modernization. The programme envisages equipping the Polish Armed Forces with main battle tanks, logistics, and training package, as well as combat assets; crew training; infrastructure preparation; and financing of expenditure tied to the selection of the specific type of ammunition and main battle tank".

The deliveries of the main battle tanks are to begin as early as 2022, along with the infrastructure investment process, and personnel training. Interestingly, the justification of the 2022 budgetary bill does not mention the MBT type anywhere (M1A2 Abrams SEPv3). Formally then, an entirely different MBT could potentially be procured. It is also surprising that the number of MBTs to be procured has also been made confidential (even though the declarations made mention 250 vehicles). The numbers for the year 2022 also have not been mentioned. This would make it impossible to check the due diligence for this programme, at the beginning of 2023.

The 2022 budgetary bill also mentions information on finances of the public sector enterprise - for the MoD, it is the Zakład Inwestycji Organizacji Traktatu Północnoatlantyckiego [NATO Investment Department]. Poland annually pays the membership fee for the NSIP Programme (NATO Security Investment Programme). In exchange, this programme is used to finance investments in different NATO member states. In Poland, the said investment pertains primarily to the infrastructure: such as airbases, naval bases, communication networks, air defence command posts, long-range air defence radars, or fuel facilities. In 2022 it has been planned that this Department would receive income of PLN 1.23 bn., spending a similar sum.

The Armed Forces Modernization Fund remaining at disposal of the head of the Polish MoD is to come in an amount of PLN 3.7 bn at the onset of 2022, and PLN 3.67 bn. at the end of the year. 191.7 million zlotys is the planned spending that would cover the acquisition of weapons and equipment, within the framework of that fund, during the year 2022. It would be mostly covered by the planned income, in the amount of PLN 161.7 million. The Fund gains its income from, for instance, the services rendered by the Armed Forces for the foreign forces, damages, and contractual penalties, and sums credited by the Military Property Agency.

The Government’s Roads Development Fund would also receive support within the framework of Part 29. National defence next year. The money is going to be used for financing the Voivodeship/district/municipal roads, bearing relevance for defence.

The 2022 budgetary bill presented would now be directed to the parliament. So far, no great changes have happened in the case of the final defence budget, during the legislative process at the Parliament and Senate. The previously made assumption and the current analysis of the Polish Ministry of Defence's budget suggest that it would be the highest defence budget in the history of Poland. There is a lot of money available to be used. One should only hope, that that money is well-spent. Even though the "ongoing expenditure", remuneration, salary, retirement pays and benefits - most of the spending - remains constant, the material expenditure assets are still managed within the Polish Ministry of Defence and the procedures in Force. It is almost certain that the taxpayers, providing more than PLN 57 bn. to cover the national defence expenditure, would like to feel safe from the external threats posed by the contemporary adversarial actors, and resulting from Poland's location on the globe.

Jarosław Ciślak