Poland Eyes Dedicated Bond to Boost Defence Spending Amid EU Deficit Pressure

Poland's Finance Minister Andrzej Domanski highlights plans to issue a dedicated bond for increased defence spending, as the country's outlay is set to rise to 4.7% of GDP. Despite EU deficit concerns, Poland aims to enhance its military funding, emphasizing strong ties with the U.S. and economic stability.

In a strategic move to bolster its military expenditure, Poland is considering the issuance of a dedicated bond as a means of raising funds, Finance Minister Andrzej Domanski revealed in a recent interview with Reuters. Despite concerns regarding the European Union's excessive deficit procedure, which Poland currently faces, the country is set to increase its defense spending to 4.7% of GDP next year from 4.1% in 2024.

This financial strategy positions Poland as the NATO leader in defense spending relative to its economic size for the second consecutive year. Domanski, speaking at the annual IMF World Bank meeting in Washington, indicated the option of a sovereign defence bond but withheld specifics on the bond's size, currency, or timing. Poland has been in dialogue with Brussels since July, as the EU's excessive deficit procedure imposes a reduction of the country's deficit by 0.5% if it surpasses 3% of GDP.

Emphasizing Poland's strategic military alignment, Domanski underscored the benefits of maintaining strong economic and defense ties with the United States, particularly in light of potential shifts in U.S. leadership. Poland aims to sustain its economic growth, projected to reach 3.9% next year, by driving private investment and possibly introducing new capital market tools, even as it adjusts its fiscal strategies in response to reduced tax revenues.

(With inputs from agencies.)