Albania - Military Budget and the Economy

Military budget and the economy

Assessments of the impact of defense expenditures on Albania's economy were traditionally hampered by the lack of government statistics on overall economic performance and the Albanian economy's isolation from the international economy. Albania generally appropriated 1 billion leks per year for the military budget, or about 5 percent of an estimated late 1980 gross domestic product of 20 billion leks--a relatively modest burden on the economy compared to that borne by other communist countries. However, the absence of reliable statistics made it difficult to calculate this budget as a percentage of total government spending--a common indicator of the priority accorded defense. It likely represented approximately 10 percent of government expenditures. However, some significant costs were probably hidden in nonmilitary elements of the government budget, thus understating the defense effort as a portion of total spending. The low subsistence wages paid to conscripts also provided a downward bias. Given Albania's low standard of living, per capita military expenditures were high when compared with average family earnings, the bulk of which were required to obtain such basic necessities as food, clothing, and housing.

The Albanian Democratic Party asserted that large defense expenditures during communist rule had impoverished Albania. It cited annual drills for military reservists and live-fire exercises for infantry and artillery units as costing Albania 100 million leks--an amount equal to the yearly municipal budget for Tiran�. Moreover the new coalition government that took office in June 1991, in a move that probably indicated that the military budget had imposed a hardship on the civilian economy, announced an immediate 20-percent reduction in defense spending.

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