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Serbia - Military Spending

The Law on Budget System Law regulates the area of public finance management in a new, completely different way. The bottom line is that the new regulation embraces and incorporates the principles and procedures of internationally recognized framework and methodology. This step could be considered an actual milestone towards complying with the regulations of developed countries and opening the possibility for total European integration. An integrated budget system with a methodology ensuring efficient and transparent planning, programming, budgeting and execution has been created, replacing the outdated fragmented management of public finances approach. Definition of a common legal framework, unified budget classification and uniform criteria and documents required for the production and control of each segment within an integrated budget system have made the setting up of the new concept possible.

Defense budget is planned and adopted in accordance with the reformed normative-systems solutions, and has therefore undergone a certain content and procedural changes in comparison with the previous ones. Therefore, it can fully meet the requirements set by the Budget Law, satisfying, in consistence with that, the required form and content so as to fully comply with the set purpose and tasks.

Defense Planning Committee has a significant role in the process of managing the Defense system. Defense planning system provides the necessary capacity building, operation and development of Defense, rational employment of the available resources and transparency of financial resources for Defense purposes disposing.

Planning funding for Defense is based on the realistic economic potential of Serbia, aims and tasks of the Defense system, security assessment, defined priorities and assumed obligations. The plan clearly defines the long-term, medium term and annual priorities and provides economical and efficient use of funds approved for the defense. Based on the strategic choices and needs identified, the system of planning, programming, budgeting and execution through the development plans and programs directly defines the Defense resource management in view of building capacity for achieving the assigned missions and tasks.

Defense funding is done on an annual basis from funds that are established by the Budget Law of the Republic of Serbia. The main sources of financing the operation and development of the Defense system are: funds from the budget of the Republic of Serbia, its own revenue, allocated surplus revenues from previous years, donations from foreign countries and international organizations, income from sale of non-financial assets, unspent funds from donations from previous years and credit-debit of the Republic of Serbia abroad.

Planning of special funds in the budget of the Republic of Serbia, efforts shall be made to provide financial resources for equipping Air Force and Air Defense with complex combat systems, as well as participation of the Serbian Armed Forces and other defense structures in multinational operations and other activities outside the Republic of Serbia. For each fiscal year, the Ministry of Defense prepares a draft financial plan for the Defense, in particular ensuring that the plan be harmonized with the plans and programs for the development and functioning of the Defense in accordance with the Memorandum on Budget and Economic and Fiscal Policy and Guidelines for the Preparation of the Budget of the Republic of Serbia.

Transparency in Defense planning and financing is achieved through the procedure of budget preparation, adoption, implementation, control and audit. Planning, development, adoption and execution of the financial plan of Defense are based on a single budget classification. The main consideration in designing the Defense system financing is to provide the necessary capacity building of the Defense system with a more favourable cost structure. The new cost structure should allow for a greater share of total costs related to investment and operating costs, while reducing the share of personnel costs.

The 2010 White Paper set a target cost structure of the Defense budget is as follows: 50% personnel costs, 30% operating costs and 20% investment costs. Bearing in mind the current state of defense, and the present structure of the costs of defense, the target structure will be reached gradually. Such a cost structure was to be established no later than 2016. The cost structure for 2010, disregarding funds for military pensions, funds for personnel costs account for 65%, operating for 22.2% and investments for 12.8%. In the period from 2010 to 2013, it will be aimed at setting the cost structure in which the funds for personnel costs account for 50%, operating for 30% and investment with 20% of the defense budget.

For regular operation and development of Defense, in accordance with the methodology of the International Monetary Fund Government Finance Statistics 1986, it is necessary to provide at least 2% of gross domestic product, with no funds for the payment of military pensions. Providing at least 2% of gross domestic product for the regular functioning and development of the defense system and planning of special funds in the budget of the Republic of Serbia for equipping Air Force and Air Defense of Serbia with complex combat systems, as well as providing special funds in the budget for the participation of the Serbian Armed Forces and other defense forces in multinational operations and other activities abroad, will create conditions for the revitalisation of the capability of the Serbian Armed Forces to carry out missions and tasks for national defense.





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