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Macedonia - Military Spending

The Republic of Macedonia is a country of limited resources. Therefore, a key goal is a cost-effective defence system that provides value for money to the taxpayers. The main objective of the Government is to provide defense that is in accordance with the capabilities, resources and the needs of the Republic of Macedonia in the context of the new strategic realities. The defence sub-system should contribute to the development of the other spheres of the society in the interest of peace and prosperity of the nation.

In the process of modernization and development of the defence system, the Republic of Macedonia must conduct reforms supported from its own resources. In order to obtain long term stable financing of the defence and guided by the interests and goals which are to be achieved, the Government has decided that the defence budget in future years is going to stay within the parameters of 2.3 -2.6 % of the GDP.

The determination of the Government of the Republic of Macedonia for stable funding of the defense by allocating 2.3% of the GDP is being complied with, except for the slight decrease in 2006. The allocated budget for 2007 will account for 2.3% of the GDP. In 2006, the budget of the MOD accounts for 6,201 billion MKD denars (about 124 million US dollars). According to the approval by the MOF, the budget of the MOD in 2007 will be 7,281 billion MKD denars (about 145 million US dollars), which constitutes an increase compared to 2006 by about 17%.

The Government continued with its commitment for long-term stable funding of the defence amounting to 2% of the GDP. For 2009 the budget approved for the Ministry of Defence amounted to 8.540.000.000 MKD (around 139 million Euros) which was 2.07% of the Gross Domestic Product. Because of the problems caused with the global financial crisis the budget was realigned in June 2009, thus reducing the MOD budget to 7.009.077.000 MKD (around 114 million Euros).

The review of the second realignment of the RoM budget is in parliamentary procedure, which will not reduce the MOD budget. With the new macro-economic indicators, the MOD budget for 2009 amounts to 1.76% of the GDP. The allocation of the budget by categories is as follows: 59.71% for personnel, 27.95% for operations and maintenance and 12.34% for equipment and modernization. Despite the decrease in the Defence Budget, the Republic of Macedonia remains dedicated to the accepted obligations for participation in international operations. The finances have been provided and the Parliament has already approved all the planned rotations until the end of 2009. The necessary funds have been provided for continuous functioning of ARM.

The proposed budget of the MOD for 2010 amounts to 7.243.000.000 MKD (around 119 million Euros) or 1.7% of the GDP. The participation in peace support operations will increase from the current 175 to about 250 personnel. The finances for the additional number of personnel deployed in peace missions are provided with the proposed budget. The allocation of funds by categories is as follows: 52% for personnel, 34% for operations and maintenance and 14% for equipping and modernization.

MoD and ARM continue the equipping and modernization with contemporary military equipment, taking in consideration the compatibility with NATO member countries’ equipment and its life cycle. This will enable high level of force protection, deployability, mobility and participation in the overall spectrum of international operations. By 2018 the declared units for NATO and EU led operations will have the priority. The effects from the global economic crisis will have a negative impact on the implementation of the Plan for Equipment and Modernization for 2009. The essential amendment refers to the delay in the procurement of the APCs and one helicopter. With the improvement of the economic situation Republic of Macedonia will be more intensively focused on equipping and modernization of ARM.

With the realignment of the budget for 2009, approved in June 2009, alignment of the incomes and expenditures was done on order to adjust them with the revised macroeconomic presumptions for the GDP increase of 1% and inflation rate of 1%. By realigning the Budget of the Republic of Macedonia a significant saving of finances is secured, which will enable retaining the macroeconomic stability, including the sustainable deficit in the balance of payments, and as most important stable exchange rate of the Denar. The whole budget has been decreased for about 9%, the expenditures are decreased for 10.2 billion denars, i.e. for 166 million euro, while the incomes are decreased for 10.1 billion denars, i.e. for 165 million euro. The budget deficit remains at the projected level of 2.8% from the GDP. On the expenditures side, the salaries are decreased for 4%, the current expenditure for goods and services are decreased for 16%, while the capital expenditures are decreased for 17% in regards to the initial projections.

In compliance with the realistic movements in the Macedonian economy, the achievements in the budget income and the attainment of the budget expenditures, the second budget realignment of the 2009 budget of the Republic of Macedonia was proposed in September 2009. The deepening of the economic crisis on global level, which reflected with delay on the Macedonian economy, enforced the need for carrying the second Realignment of the Budget for 2009, which is currently in a parliamentary procedure. The basic aim of the fiscal policy is to adjust towards the negative macroeconomic trends, through decreasing of the unproductive accrued expenses and projects with import component, continuation of the productive infrastructure projects with their own dynamics of fulfillment, as well as providing social security and macroeconomic stability. The GDP growth is projected on the level of -0.6 % in conditions of low inflation rate of 0.1%.