Finland money

Finland’s defense budget in 2023 is set to become the biggest in the country’s history

The Finnish Ministry of Finance assumes that due to changes in the exchange rate, the country will lose hundreds of millions of euros next year on the purchase of F-35 fighters, writes the Finnish publication Helsingin Sanomat.

In this case, the Ministry of Defense proposed to include in the 2023 budget a reserve of 272 million euros.

The expected loss is explained by the fall of the euro against the US dollar. The European currency weakened after Russia’s attacks on Ukraine and its consequences for the energy sector and the entire economy of the euro zone.

Last week, the euro and the dollar were close to parity, that is to say that the two currencies were trading practically at the same rate.

When in January 2021 Finland announced a tender for the purchase of new fighters, one euro still cost $1.21. This course was also used when planning the budget.

The final financial loss will depend on the future evolution of the exchange rate. It is possible that the euro sinks even more. Although the reverse development of events is also possible.

The Finnish Defense Ministry’s draft budget assumes the allocation of a total of $8.5 billion to F-35 fighters. The payment will be spread over several years, starting next year.

According to the payment schedule, in 2023 Finland will pay a little over 1 billion, in 2024 – almost 1.2 billion, in 2025 – almost 1.5 billion, etc.

The Ministry of Defense says the plans of the Ministry of Finance are quite optimistic and based on the principle “we hope everything will be fine”. In other words, they are counting on the fact that a long period of installments can offset losses – short-term losses can be offset later if the euro starts to strengthen again.

Finland’s defense budget next year is expected to become a record high. In total, the Ministry of Defense plans to spend 5.9 billion euros. This is 15% more than the current year’s budget. If the expected losses due to changes in the exchange rate become reality, the costs will reach 6.1 billion. And it is already more 20% compared to 2022.

In recent years, the defense budget has increased steadily and significantly. By way of comparison, just five years ago, in 2017, the expenditure of the Ministry of Defense did not exceed 2.8 billion euros.

The reasons for the increase in costs were large purchases of aviation and naval equipment, as well as the geopolitical situation in Europe, which changed dramatically after Russia’s attack on Ukraine. Finland is now investing in defence.

Currently, four largest battleships in the history of the Finnish Armed Forces are being designed and built by order of the Finnish Navy, and the purchase of the F-35 has become Suomi’s largest arms contract in the world. country’s history.

It should be noted that expenses related to NATO membership are still missing from next year’s draft budget. This is due to the fact that the proposal was prepared in the spring, when there was little information on this issue.

In November, the projected costs will be clarified and the draft budget will be adjusted.

In the current version of the budget of the Ministry of Defense, it is proposed to allocate 1.6 billion euros for the purchase of military equipment. This is around 765 million euros more than the corresponding line in 2022.

It is proposed to place a new order for 559 million for 2023-2032, under which, among other things, a new air defense complex capable of hitting high-altitude targets will be purchased. Currently, there is no such complex in the Finnish Armed Forces. And the war in Ukraine demonstrated great importance for the defense of successful air interceptions.

The selection process for new anti-aircraft guns is also being completed. For the moment, the Ministry of Defense chooses between two Israeli systems. One of them will be purchased early next year.