Montenegro - Military Spending

Podgorica’s obligation to increase defense spending as part of NATO from 1.66 to 2 percent of GDP and higher will not burden Montenegro’s economy, Momcilo Radulovic, a member of Montenegro's negotiating working group on EU accession for Chapter 31 on foreign, security and defense policy, told Sputnik 08 June 2017.

Montenegro became the 29th full-fledged member of the alliance on 05 June 2017. Under NATO regulations, Montenegro is required to increase its defense spending to meet the 2-percent target of the country’s GDP, amounting to some 70 million euros ($78.5 million at the current exchange rate) in 2017. "Montenegro is already spending 1.66% for defense costs. It has been planned anyway to increase these costs, so it will not be a burden for our economy to raise the defense costs even above 2%," Radulovic, who is also the president of the European Movement in Montenegro tasked by the country’s justice ministry to deal with projects.

The increase in defense costs, which comes on top of Montenegro’s annual fee to the NATO budget totaling 450,000 euros ($505,000), would even be beneficial for the country in the long-term outlook, he added. "Predictions for our economy are pretty optimistic and this increase will not have any negative effects. In fact, NATO membership will help us to decrease defense costs in a longer period of time, since we will not have significant givings for heavy weapons like tanks, aircraft or bigger boats," the Montenegrin official said.

The basic source for defense financing is the annual defence budget. The Government of Montenegro, in line with the PfP Presentation Document, will try, in the medium-term, to allocate about 2% of GDP for defence. From 2008 on, some 20% of future defence budgets will be allocated for modernisation of equipment and infrastructure.

Montenegro will introduce an effective and transparent Planning, Programming and Budgeting System (PPBS), which will ensure adequate coordination between all relevant Ministries and government bodies involved in the planning process and which will be linked to a National Security Strategy, Defense Strategy, and solid financial planning. The new PPBS will be compatible with methodology and standards used by NATO Allies and will promote transparency and enhance civilian control over defense spending.

Once the PPBS is introduced, the budget will be based on approved programmes; these will be derived from the needs, the needs from the tasks and the tasks from the goals set in the Defense Strategy. The Ministry of Defense and the General Staff of the Montenegrin Army shall be directly responsible for planning and material resources management.

The rolling programs are developed for the medium-term period of five years, with set priorities in the defense system development. The complex resources management process requires high degree of coordination between the various hierarchical levels. Doubling capabilities in the material resources in civilian and defense sector is expensive, and therefore the goal is to distribute the material resources complementary, with the full implementation and analysis of the economic criteria of purchase and maintaining material resources.

The Ministry of Defence continues preparing defence development plans. The Long-term Defence Plan stipulates the manner,the timeframe and the financial framework for developing military capabilities as envisaged by Montenegro’s Strategic Defence Review. The Long-term Defence Plan has a 10-year span. The implementation is done through Medium-term Development Plans, for each 5-year period. The Ministry of Defence will continue with the introduction of the Planning, Programming, Budgeting and Execution System, as applied by the NATO members.

The inherited excessive military infrastructure (Ministry of Defense currently manages 256 military complexes – sites) and a great number of unpromising mobile assets require significant financial means and additional engagement of staff, which could all be used for equipping and modernizing of armed forces. In the infrastructure area, the defense system reform has been focused on reducing the number of military facilities, the rationalization of their usage, uniting capacities and their modernization.

Facilities and military complexes which are not necessary for the proper functioning of the armed forces have, therefore, been suggested for sale through the Ministry of Finance. At the proposal of the Ministry of Defense, the Government of Montenegro has announced 37 sites to date, to be redundant, and they will be assessed by the Privatization Council. The final number of the locations necessary for the needs of the Army will be defined after the adoption of the armed forces organization by the Government of Montenegro, but it is already clear that the number will not exceed 30 locations.

One of the basic inherited problems which burden the efficient functioning of the Army are significant quantities of the surplus weapons, ammunition and toxic hazardous materials. Elimination of these has become a major problem for Montenegro. With the aim of resolving this problem, Montenegro started, through the “Clearinghouse” Forum for support of the South-Eastern European countries, a project for resolving this problem. To this end, the Montenegro Demilitarization Programme (MONDEM), a joint project between the Montenegrin Ministry of Defence, UNDP and OSCE was launched in April 2007. The program consisted of: destruction of surplus of conventional ammunition, around 9,900 tons, as well as chemically hazardous materials (125 tons of rocket fuel and oxidiser, and 25 tons of aluminium powder for napalm, which have been included in the overall tonnage ); a program of storage management and improvement of the security and storage of live ammunition on the promising locations – three were foreseen; and destruction of heavy weapons.

The US has decided in December 2007 to donate some $ 2 million to assist in destruction of the surplus conventional weapons and ammunition, which provides for financing and destruction of around 1,800 tons of ammunition, including 1,500 STRELA-2M MANPADs, part of navy ordnance (rockets, torpedoes, underwater mines, etc.) and air force ordnance (bombs, rockets, etc.).

As a result of the defence system reform and the Government’s actions to cut the public spending, in particular given the context of the global economic and financial crisis, the trend of decreasing defence expenditures continued in 2011. After the year 2008 which has seen significant increase in the defence budget as a share of GDP (1.58% GDP), under the impact of the economic crisis, this share went down to 1.35% of GDP in 2009, with further reduction in 2010 to 1.29% of GDP, ending in 2011 at the level of 1.20% of forecasted GDP.

Although positive results were reached between 2005-2008 in establishing the standard expenditures structure within the Defence Budget, with the share appropriated for salaries and contributions being reduced from 80% in 2005 down to 53% in 2008, it increased again in 2009 to 62% and in 2010 to 66% of the Defence Budget. This trend continued in 2011, partly due to the reduction of the total Defence Budget, and partly due to new costs arising from salaries to soldiers on peace-keeping and support missions globally. The equipment and modernisation expenditures account for 4.90% of the total 2011 Defence Budget, which is low according to NATO methodology. Due to the impact of the economic crisis, this share went from 25.74% in 2008 down to 16.24% in 2009, with further reduction to8.82% in 2010. In 2012 it is expected to see total appropriations for the defence sector of 65.11 mil euros, which would mean retaining the appropriations level from 2011, or some 1.9% of GDP.

The Defence Budget (1.3% GDP) is broken down as follows: personnel expenditures 64%,current expenditures 24.5% and modernisation and equipment expenditures 11.50%. Notwithstanding the Strategic Defence Review (SDR), which was approved by the Government, envisaging the current defence expenditures at the level of 1.3% of GDP, it will to a great extent depend on financial capabilities of the state, the state of its economy and its recovery from the impact of the economic and financial crisis, Government’s economic and fiscal policy priorities, and the defence programmes for the forthcoming period.

Projected as of 2008

YEAR 2008 2009 2010 2011 2012
Anticipated growth 7% 6% 5.5% 5.5% 5.5%
Inflation 4% 3.5% 3% 3% 3%
Nominal growth 11% 9.5% 8.5% 8.5% 8.5%
GDP amount (mil.€) 2528,96 2769,21 3004,60 3259,99 3537,09
Defense budget 1.92% 2.00% 2.00% 2.00% 2.00%
Amount for defense (mil.€) 48.63 55.38 60.09 65.20 70.74

Projected as of 2011

(in mil €)2009201020112012
Military pensions 12.412.619.915.2
Defence budget 40.640.338.244.021
Capital budget1.
TOTAL 54.055.659.065.1
share of GDP1.8%1.78% 1.85%1.92%
GDP (in mil €)2.8083.0863.0033.1173.1903.3863,5823,789
Defence Budget (in mil €) 40,148,740,640,338,2544,0246,5649,26
DB as a share of GDP1,45%1,58%1,35%1,29%1,20% 1,30% 1,30% 1,30%

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