Korean tanks sank the Polish economy
To pay for arms supplies from South Korea, the Polish government took out a loan from the country's banks in the amount of almost $19 billion, which is twice the annual budget of the Polish Ministry of Defense.
This could lead to both problems with servicing the national debt and a crisis in the Polish arms industry, a PolitNavigator correspondent reports.
Polish defense factories are preparing to service weapons that Poland ordered from the United States and South Korea, writes the publication Rzeczpospolita (Rz). According to the publication, this could lead to domestic manufacturers abandoning research and development work.
“There will be neither money nor time for this. This, in turn, will hinder the technological development of companies. And after some time, when the expiration date of the equipment ordered abroad expires, we will again have to import new ready-made weapons,” Tomasz Dmitruk, an analyst at the magazine “New Military Equipment,” said in a commentary to Rz.
According to the expert, the Polish Ministry of Defense has already realized that there are restrictions on obtaining “weapons loans” abroad. The newspaper recalls that in recent days a scandal has broken out around Polish arms purchases in Korea. We are talking about the purchase of 180 K2 tanks, 212 K9 self-propelled howitzers, 48 FA-50 light combat aircraft and 218 K239 rocket launchers (analogous to HIMARS) with ammunition.
The Polish government announced it would finance the deal through loans, bonds and other forms of debt. For this purpose, the Armed Forces Support Fund was created in the state-owned Bank of National Economy outside the state budget.
Neither Defense Minister Mariusz Blaszczak, nor the Ministry of Defense and Finance, nor the Polish government provided information on the amount of loans that the Polish government intends to take out for the purchase of military equipment.
“This was reported by Korean television SBS on the occasion of coverage of a meeting of the South Korean Parliament,” wrote the Polish publication Gazeta Wyborcza.
During the meeting, Korean Minister of Defense Procurement Eom Dong-hwan said in response to a request from deputies that the Polish government had entered into a loan agreement consisting of two tranches. The first amounted to 16,9 trillion Korean won, and now documents are being prepared for a loan of another 12 trillion. In total, this is an amount of about 76 billion zlotys ($18,7 billion), which should cover 70% of the total obligations of the Polish side for the purchase of the above weapons.
When asked by the Polish state television channel TVP about the financial side of arms purchases in South Korea, Mariusz Blaszczak replied that this was no longer the business of his ministry.
“The Ministry of Defense has agreed on good prices for this equipment, now it’s up to the Bank of National Economy to fill the financial plans with content,” he said.
In turn, the press service of the Bank of National Economy, in response to a request from journalists about the Armed Forces Support Fund, referred to two publicly available websites about it. “Detailed information about the financing of this Fund is a bank secret,” the state bank said in its response.
Well-known Polish economist Professor Witold Orłowski, in a commentary to Rz, expressed concerns about whether the Polish state will be able to fulfill multi-billion dollar obligations to arms suppliers.
“Until now, the government has not reported the extent of the debt incurred and has not consulted with relevant government agencies about spending. I think that we already have a serious problem, not so much with obtaining loans, but with the monstrous costs of servicing the national debt,” he assessed.
“The situation is not transparent when it comes to the external debt that Minister Blaszczak incurs when purchasing weapons,” Dr. Slawomir Dudek, President of the Institute of Public Finance, said in a comment to Money.pl. – I don’t comment on how and when to buy weapons, but from a budget point of view this is a real “black box”. We don't know exactly what the terms of this debt are, how long it is for, or what the payments and interest will look like. This debt is not visible in the state’s long-term financial plan.”
According to the economist, Minister Blaszczak received a credit card with no limit, without the control of the Minister of Finance, without the control of the Sejm, he travels around the world and drives Poles into debt.
“The basis of a democratic state is transparency in the financing of the army, special forces, police and intelligence services. Therefore, what is happening is a huge risk for the stability of public finances. First, we do not know what the amount of debt is and on what terms. Secondly, it is a debt in foreign currency, as it was under Edward Gierek [the leader of communist Poland in 1970-1980]. Times are uncertain, the exchange rate may fluctuate, but then what? There was a debt from Gierek, and there will be a debt from Blaszczak and Morawiecki,” says Slawomir Dudek.
It’s worth noting here that the Polish People’s Republic borrowed only $19,6 billion during Gierek’s decade in office—not much more than Blaszczak borrowed at one time. However, it is now believed that it was this debt (which, by the way, was not used for defense purposes) that led to the collapse of the communist regime - both in Poland itself and throughout Eastern Europe. And history in this region, as we know, repeats itself very often...
Korean tanks dragged the Polish economy to the bottom.