Portugal - Defense Expenditures

The Portuguese government released the country’s budget bill on 16 December 2019, which includes EUR 2,445.7 million (USD 2,721.2 million) for defence, a 23.1% increase from EUR 1,987.4 million in 2019. EUR 564.2 million would go to the army, EUR 447.1 million to the air force, EUR 485.8 million to the navy, and EUR 142 million to the general staff. Portugal approved a new military programming law in 2019 with a total of $5.3 billion until 2030. Portugal's military expenditure, which stood at US$2.46 billion in 2019, is anticipated to grow from US$2.53 billion in 2020 to value US$2.74 billion in 2024, registering a CAGR of 2.03%. This expenditure is primarily driven by Portugal's focus on enhancing its defense capabilities to counter the increasing rate of cyber-attacks and securing the country's maritime borders.

Among the structural projects that represents around one-third of the total spending there are plans to acquire strategic and tactial air transporation aircraft, 6 Agusta Westland AW119 Koala evacuation helicopters and 47 4x4 Tactical Communications Vehicles. The United States accounted for 40% of total defense equipment imports during 2012-2016. Portugal is procuring, 6 Viana do Castelo OPVs [offshore patrol vessels] and one multi-role vessel, and a refueling vessel. Apart from procurement, the country is also modernization its Black Shark Heavyweight Torpedoes, Tridente Class Attack Submarines.

Portuguese military expenditure declined at a CAGR of -3.49% to value US$12.2 Billion cumulatively during the historic period. This was primarily due to the debt crisis, which has severely affected the Portuguese economy, requiring the country to adopt tough austerity measures, such as reducing wages and raising tax rates. However, the Portuguese government undertook anti-austerity measures between 2016 and 2017, and planned to completely withdraw austerity reforms.

Portugal's defense imports declined after 2012 due to budget cuts. The country sourced the majority of its defense equipment from the US, accounting for 39.5% of total imports during 2012-2016. Italy, Austria, Denmark, Finland and Israel are other major countries from which Portugal has imported military equipment. Over the period 2017-2022, Portugal's defense imports are expected to increase slightly as Portugal is in the process of purchasing six KC-390 military airlifters from Embraer. The country was also willing to acquire a landing platform dock (LPD) and new replenishment ship post-2020

Like most NATO allies, Portugal falls short of the NATO official standard of two percent of GDP dedicated to military spending. Portugal is at around 1.3 percent and spends that money unwisely. Portugal has more generals and admirals per soldier than almost any modern military: 1 per 260. The U.S., by comparison, has a ratio of 1 per 871. The image of generals sitting around doing nothing is no mere allegory. Portugal has an additional 170 generals and admirals receiving full pay while in inactive reserve status.

Portugal also suffers from buy-European procurement pressures. The EU's European Defense Agency ostensibly is supposed to harmonize the purchase programs of member states for greater efficiency. The thinly-veiled true objective, readily confessed to by Portuguese military and political officials, is to ensure member states "buy European" regardless of whether the items fit Portugal's defense strategy.

Regarding defense procurement, the MOD's desires and actions seem to be guided by peer pressure and the desire for expensive toys. The MOD purchases weapons platforms as a matter of pride, regardless of their utility. The two most obvious examples are their two submarines (long delayed) and 39 fighter jets (only twelve of which were airworthy in 2009).

In the 1970s the problem of colonial wars contributed to domestic unrest since such conflicts lacked popular support in Portugal. The wars drained the military which, in many cases, spent such long tours in Africa that they began to empathize with the popular desires of the people. Portuguese military expenditures per capita were second. only to those of Israel. All of this contributed to the publication of a book by a Portuguese General, Antonio de Spinola, which clamored for a change in the status of the colonies. A military overthrow, or revolution, occurred in 1974, led by young career military officers.

Over the period 1978-89, the defense budget increased by an average of 1.9 percent annually in real terms. According to a survey by the United States Arms Control and Disarmament Agency (ACDA), which applied certain adjustments to the official figures for defense, Portuguese military expenditures rose in real terms from US$1.189 billion in 1979 to US$1.457 billion in 1989 (both amounts in constant 1989 dollars). The Portuguese defense budget was 197.5 billion escudos (US$1.25 billion) in 1989, 219.1 billion escudos (US$1.54 billion) in 1990, and 206.8 billion escudos (US$1.73 billion) in 1991.

Portugal's defense outlays were the lowest in NATO with the exception of Luxembourg (Iceland has no military forces). In terms of defense expenditures per capita, Portugal was the lowest in NATO (US$141 in 1989) with the exception of Turkey. However, in terms of the share of gross national product (GNP) allotted to defense, most NATO countries spent less than Portugal. Portugal's expenditures on its military establishment had risen from 4.5 percent of GNP in 1960 to 8.3 percent of GNP during the course of the colonial wars. In the 1980s, defense expenditures averaged 3.43 percent of GNP. Defense outlays, which had constituted 26.7 percent of the national budget in 1960, rose to nearly 46 percent of the budget during the peak of the overseas wars in 1971. By 1977 defense expenditures had declined to 10 percent of central government expenditures, and they remained below 10 percent throughout the 1980s.

In 1988 expenditures were allocated among the services on the following basis: army, 36.9 percent; navy, 30.6 percent; air force, 22.3 percent; and general staff, 10.1 percent. The largest expenditure category was personnel (64.5 percent), among the highest in NATO and exceeded only by Belgium and Luxembourg. The principal cause was the fact that the rapid decline in total staff was not matched by a decline in the officer roster. Moreover, pension payments to demobilized personnel were a significant cost factor. Of the service branches, the army was burdened with the highest outlay for personnel, amounting to 80 percent of its budget. This outlay was attributable in part to the large number of officers on active duty in excess of the army's requirements. By comparison, 60 percent of the navy's budget was absorbed by personnel expenses. Portugal's outlays on major equipment items as a share of the defense budget (13.4 percent) were among the lowest in NATO, as well.

The Portuguese Government's 2009 budget request maintained the record low budget deficit that was achieved in 2008 (2.2% of GDP). There are no major policy or spending shifts in the budget request and, for that reason, there was little significant criticism from opposition parties or the media. The Government of Portugal (GOP) presented its 2009 budget to the parliament 15 October 2008, claiming the budget to be an example of "realism, prudence, and rigor." Portugal's fiscal year matches the calendar year.

Defense received a budget of 2.24 billion euros; up 3.9% from 2008. The Ministry of Defense (MOD) budget represented 1.3% of GDP, far below the 2% NATO target, even though the MOD looked to make key investments in equipment and infrastructure. Nonetheless, personnel costs topped 1.2 billion euros, 54% of the ministry's budget. The budget specified that Portugal will continue commitments overseas, citing activities in the lusophone world and with the European Maritime Policy, but does not specifically cite NATO commitments in Afghanistan. The army, air force, and navy all received increases of between five and six percent in their operating budgets.

"Modernization" was the key word in all discussions of defense investments and the Military Programming line item receives a 54% increase to 314 million euros. None of these funds are earmarked for specific projects, but each of the services has new purchases and major upgrade projects coming on line in 2009.

The Defense Ministry of Portugal's budget represented 1.4% of GDP in 2010, standing at US$3.1 billion. The country's defense budget grew strongly at a CAGR of 8.58% during the period from 2006 through 2010, but with a soaring national debt, the government was forced to adopt austerity measures which are expected to result in the defense budget declining at a CARC of -0.45% during the period from 2011 through 2015 to reach US$3.1 billion by 2015.

Military modernization plans and participation in peacekeeping missions were the primary forces driving Portugal's defense budget, the majority of which is spent such on revenue expenditure such as the salaries and pensions of armed personnel, and operational and maintenance costs. Capital expenditure, which includes expenditure for equipment procurement, constituted an average of 17.2% of the defense budget during the period from 2006 through 2010 and is expected to decrease to an average of 16.9% to 2015.

The reduction in troop numbers was expected to bring down the allocation for land forces from an average of 35.7% during the review period to 30.1% during the forecast period. The allocation for the navy is expected to decline marginally from an average of 26.4% during the review period to an average of 26.1% during the period 2010-2015, while the allocation for the air force was expected to decline from an average of 20.7% during the period from 2006 through 2010 to an average of 19.1% during the period from 2011 through 2015. The allocation to common support services was expected to increase from an average of 15.0% during the review period to an average of 22.6% during the forecast period, to help the domestic defense industry to integrate with the European defense industry value chain.