Defence Expenditures

Defence Expenditures

Defence Expenditures and the Efficiency of the Use Thereof

The purpose of the defence expenditure allocated from the state budget is to attain the strongest possible defence capability for Estonia within the limits of the resources provided. The allocation of defence expenditures is based on long-term national defence objectives and approved plans, taking into account the impact of the expenditure on the ability to defend the country.

In order to serve as a deterrent, all units must be militarily capable – that is, fully armed, equipped, manned and with reserves at their disposal.

Comparison and Growth of the Defence Expenditures of the Baltic Republics

Following the restoration of independence, defence expenditures have risen at a stable rate with the help of economic growth and political support. An exception to the above took place in 2009-2010, following the global economic crisis, when cuts had to be made in practically all state institutions, including the Ministry of Defence to maintain a balanced budget.

Comparison of Defence Expenditures of the Baltic Republics | million euros per year

* Actual costs are given until 2018. The current budget serves as the basis for 2020, and an estimated forecast has been presented for 2021 and 2022.

Defence Expenditure as a Share of GDP

As a percentage of the gross domestic product (GDP), the defence expenditure is an expression of Estonia’s dedication to promoting military national defence as a member of NATO.

When calculating the percentage, all costs are taken into consideration and the GDP calculation or forecast valid at the moment of disclosure is followed.

The Defence Investment Programme has been approved by the Estonian Government in 2017 with the aim to speed up the process of meeting critical capability targets.

The Estonian Government has allocated additional resources to the Ministry of Defense for host nation support (HNS) for the construction of additional infrastructure and its upkeep for the increased allied forces presence in Estonia.

The primary host nation support is allocated towards Ämari airbase for the Baltic Air Policing missioon, NATO’s Force Integration Unit in Tallinn and the Tapa military base, where the NATO battlegroup is based.

Defence Expenditure as a Share of GDP | planned vs actual

* Until 2019, the funds allocated from the State Budget as defence expenditure have been presented. 2020 is based on the current budget.

Volume of Procurements

The structure of the defence budget is an important indicator alongside the absolute defence expenditure. The more of its defence spending that a country is able to invest in arms procurement, the more effective the overall use of that defence spending will be.

Estonia’s goal is to have units that are fully armed, supplied and with reserves at their disposal, which is why special equipment procurements demonstrate that the focus is specifically on establishing military capabilities. The equipment being acquired includes items that were previously missing as well as the replacement of equipment that is becoming obsolete.

Volume of Procurements | million euros per year

* Until 2019, the funds allocated from the State Budget as defence expenditure have been presented. 2020 is based on the current budget.

Share of Procurement and Infrastructure Investments

In terms of sustaining and developing military capabilities the division of defence expenditures between NATO countries is deemed sustainable, with procurements and investments comprising one third of defence expenditures, labour costs another third and everyday management costs the final third. In addition to defence related equipment, the supranational foreign intelligence function is also funded by the defence budget.

Estonia has managed to keep its level of investment in special defence related equipment higher than the majority of NATO countries.

Major procurements and infrastructure investments in the area of the Ministry of Defence are managed by the Centre for Defence Investments.

Share of Procurement (as a Precentage) and Infrastructure Investments

* For the period 1998–2006 information on the share of infrastructure investments was not collected as a uniform system. Until 2019, the funds allocated from the State Budget as defence expenditure have been presented. 2020 is based on the current budget.

Examples: How Much Do Modern Weapon Systems Cost In Comparison With Estonia's Annual Defence Budget

For many years Estonia has belonged to the ranks of those NATO countries whose defence expenditure remains at 2%. Today, this group is comprised of a significantly larger number of countries and will expand even further in the coming years. However, the capabilities of all countries contributing 2% are different, as we procure equipment, build infrastructure and employ people with the euros that fit within that percentage.

A comparison of the actual global purchasing power of Estonia’s defence expenditures based on the indicative cost of modern weapon systems. Depending on the availability of the source data, the comparison shows the acquisition cost of either weapon systems intended for a military unit (e.g. tanks) or one (1) weapon system (e.g. multi-purpose combat aircraft). For example, it would take 14 years of Estonia’s defence budget to buy a single modern UK aircraft carrier (at 2019 prices).

Information here reflects the indicative purchase prices, note that each weapon system or item of equipment also includes life cycle costs. The purchase price is approx. 1/3 of the lifecycle costs of the system.