Czech Republic - Military Spending

The Czech Government spent about 1.2% of GDP on defense in 2011. President Miloš Zeman announced an increase in the Czech Republic’s defence budget at the NATO summit in Wales in September 2014. Prime Minister Bohuslav Sobotka said: “Christian Democrat leader Pavel Belobrádek, ANO leader Andrej Babiš and I have definitively confirmed our coalition’s commitment to gradually increase our defence spending budget in the coming years so that by the year 2020 it reaches 1.4 percent of our country’s GDP.” This however still falls short of the country’s commitment to annually spend 2 percent of its GDP on defence. But after years of neglecting the military, the Czech government has moved in the right direction.

The Czech minister of defence, Martin Stropnický, said the country’s military budget should increase by 0.1 percent of GDP annually in the coming years, starting in 2015. It was necessary to rethink priorities because of the Ukraine crisis, he said. “Firstly, an extensive conventional military conflict in Europe is – in the light of this development – possible. Secondly, the warning period that we have to prepare for such a conflict has become markedly shorter – it is now mere weeks or months. Thirdly, we can no longer rule out the possibility of an internal military threat against a NATO member. Rather, we have to prepare for it collectively as if for a real possibility.”

Defense spending declined sharply in the transition from a large Soviet-era defense force to the post-Cold War era. Defense Minister Dobrovsky said in 1991 that the ministry's job was to uniformly defend the territory of the state but that to do this certain needs (read enough money] had to be met. Cuts in the Czech defense budget were slowing the pace of military reform and inhibiting the relocation of troops to Slovakia and Eastern portions of the country [closer to the USSR].

The Czech Government spent about 2.2% of GDP on defense. This put Czech defense spending on a level slightly above the European NATO average. The Czech Republic has good to excellent relations with all of its neighbors, and none of its borders are in question. The Czech Republic is a member of the UN and OSCE and has contributed to numerous peacekeeping operations, including IFOR/SFOR in Bosnia and KFOR in Kosovo, as well as Desert Shield/Desert Storm.

The Czech MoD's budget in 1993 was CZK 23.777 billion (1993 currency), representing 2.61% of GDP, or 6.7% share of MoD's expenditure in terms of overall expenditure of the State Budget. In the mid-1990s most of the aspiring NATO members were facing financial constraints and can realistically expect to do very little on their own to make their military systems compatible with NATO's systems. For example, according to U.S. officials, as of 1996 the Czech defense budget was only about $1 billion. The most that may be expected of these nations is gradual movement toward interoperability. For example, the Czechs have a 10-year modernization plan to upgrade their equipment and become interoperable with NATO forces. In 1998, based on NATO’s definition of defense spending, the Czech Republic spent an estimated 2 percent of its GDP on defense.

Through its Foreign Military Financing (FMF) program, the U.S. played an important role in helping the Czech military transition to NATO compatibility. The FMF program includes advisory assistance for restructuring as well as funds for acquisitions. Since 1996, the U.S. provided over $87 million to the Czech military through this program. Its purpose was to assist the Czech military’s transition to becoming a fully integrated NATO partner.

The Czech Republic pledged continued defense spending increases until it reached the NATO-Europe goal of defense spending as a percent of GDP of 2.1 percent. Czech defense spending increased to 2.2% of GDP. Military spending for 1999 was $1.064 billion or 41.25 billion crowns. In 2000, the military spent over $1.08 billion or 43.95 billion crowns. For 2001, military spending is earmarked at $1.43 billion or 45.11 billion crowns.

By the year 2006 MoD's budget was CZK 55.694 billion (2006 currency), which is only 1.8% of GDP, and 5.8% MoD's share in terms of overall expenditure of the State Budget of the Czech Republic (49% personnel expenditure, 12% equipment expenditure, 10% infrastructure expenditure, and 29% of other expenditure). The decrease in the percentage of GDP allocated for defense is significant. The Czech Republic had planned to increase defense spending during 1999-2003 to modernize their forces and meet NATO requirements.

The transformation has not been entirely successful. The main reason can be seen in the diminishing financial framework and postponement of individual modernisation projects in the Czech Armed Forces. As a consequence of ad hoc budget cuts resulting in postponed investments, non-systemic investments and overpriced contracts, the defence sector has accumulated internal debt in armament, equipment, materials and unmovable infrastructure. Retirement and separate benefits paid to former soldiers are also a part of military expenditures. By 2011 they covered more than 10% of the MoD budget, and this percentage was expected to grow even higher unless the cutbacks on defence expenditures are discontinued.

The Czech Republic invested substantial financial resources into national defence. Supersonic jets were leased to protect Czech airspace, trucks have been partially replaced, the purchases of armored personnel carriers and light fighting vehicles advanced modernisation of the mechanised forces, a part of transport aircraft has been replaced and transport helicopters modernised, some items of the air defence equipment have been modernised, and new assault rifl es are being procured.

However, Czech defence spending had been gradually decreasing since 2006. The process of renewal of main weapon and technical systems, which form the basis of the armed forces capabilities, is yet to be completed. In addition to increasing cost of work, the costs per soldier are also growing. The deficit has reached alarming numbers, yet the extent and degree of difficulty and risks placed on the armed forces are rising. The difference between growing requirements and diminishing resources is not sustainable in the long run. These trends increase the risk that the set of capabilities, indispensable for ensuring all current functions of the armed forces and fulfilling the political military ambitions, will become unachievable.

The financial crisis negatively affected government finance. Due to the slump, the government deficit rose from 2.7 per cent of GDP in Fiscal Year (FY) 2008 to 5.8 per cent in FY 2009, and subsequently the government debt increased from 30 per cent GDP in FY 2008 to 35 per cent in FY 2009. According to Excessive Deficit Procedure, a set of across-the-board austerity measures had to be executed, in order to prevent an excessive deficit. There was a considerable drawdown in defence spending; the 2010 MoD budget dropped by more than seven billion CZK, in comparison with FY 2009, and the 2011 one is by five billion CZK lower, then the 2010 one.

As for the distribution of military expenditure, NATO recommends allocating no more than 50% for expenditures devoted to personnel and maintaining expenses for the development of capabilities above the 20% line. The remainder (30%) falls to the expenses that are needed for the life and preparation of the armed forces. This effort has not come to fruition, since FY 2006 the expenditures devoted to personnel have kept growing, therefore the expenses on equipment and infrastructure have been slowly falling. Such a development determinates the sustainability of military capabilities. The distribution of military expenditures has not been desirable.

An alarming fact is that around the year of 2015, the life-cycle expiration periods of several expensive systems, which implies a possible modernisation process through purchase investments, are converging within a short time horizon. Another critical threshold is the year of 2020, as it specifically concerns the supersonic jets, airport radars, 2K12 KUB surface-to-air missile system, replacement of 120 mm mortars, modernisation or replacement of the infantry fighting vehicles, artillery and engineering equipment.

The demand for huge investments into the renewal and modernisation of technical aspects of many crucial military capabilities will be concentrated within two relatively short periods around the years 2015 and 2020. With regards to the investments planned around 2015, which amount to several tens of billions of crowns, they cannot be staggered over time due to the current budget limitations and its future prognosis. This period is burdened with the leasing deadline for JAS-39 Gripen supersonics and the end of the service life of both the 2K12 KUB surface-to-air missiles and the air defence radar equipment. Furthermore, the artillery will need modernisation and the service life of a part of the BMP–2 fighting vehicles will expire. The Mi-24/35 attack helicopters will face a similar problem in the following decade.

Therefore, reaching full operational capability of the armed forces by 2018, as planned appears to be unrealistic. For this reason, it is necessary to consider the reduction of capabilities, especially those that are not utterly indispensable with regard to the roles and functions of the Czech Armed Forces.