Contributing to defense and national security requires changing the mindset to work today for tomorrow

The appropriate level of defense spending depends on the security environment and international circumstances to deter threats and maintain peace. Amidst the risk of a protracted conflict in Ukraine and beyond, it is not surprising to see high levels of military spending even in Western Balkan countries that are not on the front lines of a potential war.

The risk of inter-ethnic and cross-border conflicts between the Balkan states is anyway the biggest risk among them, in the case when they have become or will become members of NATO[1]

However, the Russian invasion of Ukraine in 2022 has become a direct influencing factor, leading to the largest increase in military spending in 3 decades.

Defense spending through 2023 and 2024 varied from country to country, but most North Atlantic Treaty Organization (NATO) members have already increased military spending to the minimum target of 2 percent of GDP.

According to the Balkan Defense Monitor 2024, Serbia is the leading country in the Western Balkans in terms of defense spending, which in the last 5 years reached 2% of GDP. Meanwhile, by 2023 defense spending is in second place in North Macedonia with 1.7% of GDP, followed by Albania with 1.6% in 2023, both of which are NATO members.

From the data of the financial institutions of the Western Balkan countries, it seems that the defense budget in Serbia is 2% of the GDP or 1.5 billion euros per year. The structure of defense expenses goes to the level of 40% for logistics and weapons and to the level of 40% for salaries and personnel treatments.

Albania will reach a defense budget of 2% of GDP only in 2024, or the annual value to spend up to 500 million Euros.

Until 2023, the defense budget was as much as 1.6% of GDP or up to 350 million Euros per year,
Albania spends 48% of its defense budget funds on logistics and weapons and 24% on personnel.

Kosovo for 2024 has approved the most ambitious defense budget compared to other countries in the region. The approved level of defense spending is 2.1% of GDP or 153 million Euros per year. If we calculate it together with the budget for security, both together amount to 5% of the GDP or 350 million Euros, a considerable amount for the budget of Kosovo.

The defense budget is divided into 28% for salaries and treatment for personnel and 38% for investments in armaments, logistics and troop support.

North Macedonia has approved a defense budget of 1.7% of GDP or 270 million Euros per year. North Macedonia spends 38% of the defense budget as personnel expenses, while it spends up to 26% of the defense budget on weapons and equipment.

Bosnia and Montenegro have approved a defense budget of 1% of GDP, where respectively the sums for the defense budget are 300 million Euros and 80 million Euros per year
Bosnia and Herzegovina’s expenditure on personnel is the largest at 89% of the budget. It is followed by Montenegro, which spends 56% on personnel and only 24% on weapons and equipment.

Additional defense spending compared to the pre-war period in Ukraine amounts to about 0.3 percent of GDP, which is an increased fiscal burden that must be financed either by new sources of revenue or additional borrowing.

The fiscal impact of high interest rates and increased needs for defense and national security appears to be greatly hampered by long-term pressures stemming from public debt management and reduction, as well as growing social pressure for higher payments. , together with the needs for quality health care and the growing costs from natural disasters, in the conditions where each Balkan country experiences a shrinking and aging population.

But we must understand that defense and national security spending is an intense and delicate political issue, which makes it more difficult for everyone from the public and civil society to assess the quality of defense investments.

First, the defense and security industry needs national political support, as an important obligation, where the consensus between political forces and political groups in the Assembly should not affect the budgetary objectives and those supported by long-term foreign funding policies .

Second, investment in defense is a necessary factor in stimulating the long-term health of the defense industry. On the other hand, it is necessary to assess and manage defense expenditures in a NATO context, in order to underline the specific nature to encourage defense investments with additional resources.

The increase in the defense budget should be aimed at filling existing funding gaps instead of allocating special resources taken from other programs. Sources can be funds from the reduction of the administration, from the fight against money laundering, from the confiscation of the assets of corruption, of criminals.

The reason why additional resources should be clearly defined is related to the risk of setting arbitrary spending levels, simply to meet the obligation of the 2% of GDP level, when in fact they should be adapted and harmonized with the actual level of policies implemented. rational defense. If this harmony does not occur between budget funds and clearly programmed defense and security needs, then a budget not analyzed in this perspective negatively affects strategic sustainability.

This inconsistency between the reality of defense needs and the obligation to spend where and how much is needed would consume time and funds for poorly implemented programs and in non-fulfillment of the national security strategy, where the very image of the country is also damaged.

A long-term budgetary assessment of future costs is necessary, where the defense budget must be harmonized with the security budget, considering that it will be activated also in order to guarantee the reactivation of ammunition production, military equipment, etc.

Even this venture, which will be built on public-private partnership models, requires accurate forecasts, since practice has proven that initial costs are underestimated in any business planning of the military industry.

According to the analysis published in September 2024 by the IMF expert[2] “Cyclical fiscal pressures should not be underestimated, but the real formidable challenge is national security, climate change and, most importantly, adverse demographic changes with negative economic consequences and fiscal”.

In terms of the whole panorama that is already affected by the increase in military spending, it must be understood that national security and defense are not only served by direct funds, but also by ensuring reforms for economic and social sustainability, the fight against population aging, protection from natural disasters, but also to meet the challenges of openness to technology and cyber attacks.

All together, they are the most challenging tasks for governments, but also for the population itself, which in case of conflicts will be faced with increasing risks, in case the mindset is not changed to contribute today for tomorrow with an inclusive approach.

[1] https://www.nato-pa.int/download-file?filename=/sites/default/files/2024-05/050%20DSCFC%2024%20E%20rev1%20-%20WESTERN%20BALKANS%20-%20LANCASTER%20REPORT.pdf

[2] Serhan Cevik WP/24/201, https://www.imf.org/-/media/Files/Publications/WP/2024/English/wpiea2024201-print-pdf.ashx