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Nicaragua - Military Spending

A total of 82 million dollars allocated to defense in the budget overall in 2015. The report Comparative Atlas of Defence in Latin America and the Caribbean 2014, authored by the Defense and Security in Latin America Network, indicated that the armed forces of Nicaragua had the least budget allocated in the region the army, and that they are less effective and have less air means compared with Guatemala, El Salvador and Honduras, while Costa Rica and Panama do not have armies.

According to studies published by the United States Arms Control and Disarmament Agency (ACDA), Nicaraguan military spending totaled US$10 million in 1979, the year in which the Somoza administration was overthrown. This amount constituted 0.8 percent of the gross national product (GNP). Under the Sandinistas, military expenditures rose rapidly, going from US$53 million in 1980 to US$192 million in 1985. The latter figure was more than 17 percent of GNP and more than 26 percent of total government expenditures. ACDA was unable to estimate defense spending for the years 1986-89.

Valid comparisons of defense outlays between the Ortega and Chamorro administrations are difficult because of hyperinflation, the precipitous drop in value of the cordoba (C$), and the chaotic exchange rate structure in the late 1980s. The United States Department of State estimated that military expenditures in 1989 were between US$76 million and US$90 million, a reduction of 44 percent from the previous year. In 1989 defense outlays constituted 36 percent of the entire budget. The announced defense budget figure for 1990 was US$166 million, corresponding to 25 percent of the total government budget that year. As military cutbacks continued, Chamorro's military budget proposal for 1991 of US$78.6 million was reduced by the National Assembly. According to ACDA, actual defense spending in 1991 was US$70 million, equivalent to 4 percent of the GNP and 14 percent of the national budget.

In December 16, 1990 a carefully negotiated plan to reduce the Sandinista-led army in Nicaragua was upset after the country's National Assembly cut nearly $20 million from a slimmed-down defense budget submitted by President Violeta Barrios de Chamorro. Chamorro's entire National Opposition Union bloc, a majority in the assembly, defied the president by voting to lower defense spending from $166 million in 1990 to $58.8 million in 1991, less than 12% of next year's $495-million national budget.

To some extent, the EPS has been able to compensate for these drastic curbs on spending by selling excess equipment. In 1992, for example, the EPS sold Soviet helicopters, APCs, cannons, and antiaircraft missiles to the Peruvian armed forces for US$25 million. All receipts from such sales went directly to the EPS. United States concern over Sandinista control of the police and security forces precluded extending military aid to the Chamorro government and prohibited transactions under the United States Foreign Military Sales Program. In fiscal year (FY) 1994, however, the United States Department of Defense proposed allocating a small amount of money to the EPS for civil-military training. The EPS sought further military cooperation with the United States, which the United States has made conditional on establishment of civilian control over the EPS and prosecution of human rights violations by members of the EPS.

According to the World Bank, military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities. Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid (in the military expenditures of the donor country).

Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This definition cannot be applied for all countries, however, since that would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. (For example, military budgets might or might not cover civil defense, reserves and auxiliary forces, police and paramilitary forces, dual-purpose forces such as military and civilian police, military grants in kind, pensions for military personnel, and social security contributions paid by one part of government to another.)

NATO defines defense expenditure as payments made by a national government specifically to meet the needs of its armed forces or those of Allies. A major component of defense expenditure is payments on Armed Forces financed within the Ministry of Defense (MoD) budget. Armed Forces include Land, Maritime and Air forces as well as Joint formations such as Administration and Command, Special Operations Forces, Medical Service, Logistic Command etc. In view of the differences between the NATO and national definitions, the figures shown may diverge considerably from those which are quoted by national authorities or given in national budgets.

They might also include "Other Forces" like Ministry of Interior troops, border guards, national police forces, customs, gendarmerie, carabinierie, coast guards etc. In such cases, expenditure should be included only in proportion to the forces that are trained in military tactics, are equipped as a military force, can operate under direct military authority in deployed operations, and can, realistically, be deployed outside national territory in support of a military force. Also, expenditure on Other Forces financed through the budgets of ministries other than MoD should be included in defense expenditure.

Pension payments made directly by the government to retired military and civilian employees of military departments should be included regardless of whether these payments are made from the budget of the MoD or other ministries. Expenditures for peacekeeping and humanitarian operations (paid by MoD or other ministries), the destruction of weapons, equipment and ammunition, and the costs associated with inspection and control of equipment destruction are included in defense expenditures.

Research and development (R&D) costs are to be included in defense expenditures. R&D costs should also include those for projects that do not successfully lead to production of equipment. Expenditure for the military component of mixed civilian-military activities is included, but only when this military component can be specifically accounted for or estimated. Financial assistance by one Allied country to another, specifically to support the defense effort of the recipient, should be included in the defense expenditure of the donor country and not in the defense expenditure of the receiving country. War damage payments and spending on civil defense are both excluded from the NATO definition of defense expenditure.