From correspondents in Moscow, Russia, 12:32 AM IST

Russia's defence spending will increase 27 percent in 2009, Interfax news agency quoted Prime Minister Vladimir Putin as saying Tuesday.

'Nearly 2.4 trillion rubles ($94.23 billion) will be allocated for the needs of national defence and security,' Putin said. 'This is an increase of 27 percent.'

The announcement comes on the heels of Russia's crushing defeat of Georgian forces on the former Soviet republic's soil last month.

President Dmitry Medvedev said last week that the five-days of fighting in Georgia showed the need for a full-blown modernisation of the military and updating of hardware.

Putin hiked the defence budget during his eight-year presidency to match the country's resurgent economic might.

But defence analyst and military brass warn that internal reform and investment in research and development is also needed to stall the army's decline since the collapse of the Soviet Union.

Putin's statement also came as Russian stocks tumbled to more than three-year low owing to the drop in US markets and investor fears.

(Staff Writer, © IANS)