The defence expenditure and spending of the Republic of Serbia with special reference to the COVID-19 pandemic period

Abstract

The financing of the expenditure and spending of the Ministry of Defence and the Serbian Armed Forces is defined by the Budget System Law. The amount of allocated funds for defence in all countries is mainly related to gross domestic product. The financing of the defence system directly depends on the economic position and development of state, and also on the available budget. Therefore, the greatest responsibility of those who are authorized is to dispose of budget funds in a certain period of use for the most important state priorities, as well as the need for the highest control over the disposal and use of these funds. The financing of the defence system of the Republic of Serbia, as a direct beneficiary of budget funds, is conducted in compliance with the procedures defined by laws and other normative regulations of the country. The COVID-19 pandemic represents a global security risk and threat, and 2020 has been taken for consideration and analysis of defence expenditure in state budgets. Thus, the readiness of states and defence forces to resist security challenges and threats has been presented. Moreover, fifteen countries that allocated the greatest funds for defence in 2020 have been presented. China is the only country that has positive growth of gross domestic product in the considered year and at the same time the highest percentage of allocations from GDP for defence. The five European countries that allocated the most for defence have also been presented, as well as the ratio of total allocations for defence in Europe and the United States. The average allocation rate for all countries (Table 2) in 2020 is 1.59% of GDP, which is shown in Graph 1. In the considered period, the Republic of Serbia allocated 1.89% of GDP for defence, which is above average. The percentage share of defence expenditure in GDP in recent years is approximately 1.9%. Graph 2 shows the percentage share of defence expenditure in the period from 2013 to 2021. The specificity of financing defence expenditure and spending has been emphasised because the defence system, like other complex systems, is characterized by complexity, openness, dynamism, strict hierarchical structure and two-way relations. Bearing in mind that the Ministry of Defence and Serbian Armed Forces are a non-profit organization, defence expenditure and spending are almost entirely financed from budget funds. The exception is certain categories of revenues, in a very small percentage in relation to the total available financial resources. In addition to its revenues, other sources of financing, such as various donations, unspent revenues and donations from previous years, income from the sale of non-financial assets and voluntary transfers are represented in financing the expenditure and spending of the Ministry of Defence and Serbian Armed Forces. It is very important to point out that since 2020, as a source of financing defence expenditure and spending, funds from the source - income from internal debt - has been used.