The Czechia may oblige by law to spend two percent of GDP on defense

The Czechia may oblige by law to spend two percent of GDP on defense

The Czechia may commit itself by law to a tax of two percent GDP for defense

Vehicle of the Czech army – illustrative photo.

Prague – The Czechia may commit itself by law to spending two percent of its gross domestic product (GDP) annually on defense. The lower house supported the government's bill in the initial round, the opposition movement SPD did not push for it to be returned to the cabinet for finalization. The bill, which is also supposed to ensure stable financing of expensive defense projects to modernize the army, will now be dealt with by deputies from the defense and budget committees in a half-monthly period. The coalition pushed for its reduction only the second time.

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The Czechia has repeatedly made political commitments in the North Atlantic Alliance to increase defense spending to at least two percent of GDP. The government coalition wants to fulfill the promise by 2025 at the latest. The draft law could come into effect as early as July, and would therefore already apply to next year's state budget. Compared to the medium-term budget outlook, the Ministry of Defense's revenues could thus increase by about 21.5 billion crowns in 2024. So far, plans have included defense expenditures of 130 billion crowns.

Defense Minister Jana Černochová (ODS) pointed out that some states spend an even higher percentage of GDP on defense. She admitted that it would be a big hit to the budget, but according to her, there is no other option. “We must have a modern and efficient army,” she said. On the other hand, Radovan Vích (SPD) questioned the proposal, according to him it is non-standard. According to him, the army should receive as much money every year as it can meaningfully invest. According to Vích, enacting the volume of defense spending could be a waste of money. “On the contrary, there are strong reasons to help mainly our citizens, whose living standards are falling,” he said. According to Pavel Růžička, the ANO movement supports the government's efforts to fulfill its alliance obligations. According to him, only Poland and Latvia have guaranteed expenses among the member states, and the Ministry of Defense will be in a unique position compared to other chapters of the state budget.

According to the draft, the expenses of other ministries and authorities could also be included in the total defense expenditure. However, these expenses would have to meet the limitations set out in NATO documents. The draft law assumes that other ministries will notify the Ministry of Defense of their defense spending plans three years in advance, which will include them in the defense budget.

The draft will change the rules for financing large multi-year projects with a fundamental impact on the state's defense capability and higher costs than 300 million crowns. The government will decide on them. The Ministry of Defense will have a total amount for them every year, and will be able to use the money for individual projects in a simpler way.

Even as an opposition member of parliament, Černochová proposed increasing defense spending to two percent of GDP already in the past two election periods. The last House of Representatives rejected the bill in the initial round. Critics doubted whether the Defense Department would be able to spend the money, talking about a blank check.

The current bill also changes budget rules. It stipulates, among other things, that state-owned enterprises and the national enterprise Budějovický Budvar will also have to have accounts subordinate to the state treasury. They will keep accounts in the Czech National Bank, they will be able to open them elsewhere after the approval of the Ministry of Finance.