I. GENERAL PROFILE
Area: 110,994 sq km
Population: 7.97 mln
Population density: 71.8 per sq km
Capital: Sofia

GDP (2000): $ 11,334 mln
GDP (2000) per capita: $ 1,422
2000 GDP growth: 4.5%
Budget deficit as % of GDP: 2.1%
CP Index Change (2000): 10.4%
Foreign debt: $ 10.364 bln

Government: Democratic Republic since 1990. Head of State: President Petar Stojanov since 1996. Head of Government: Prime Minister Simeon Borisov Sakskoburggotski since 2001.

Religion: The majority of the population are Christian, the main denomination being Bulgarian Orthodox Church. There is also a significant Muslim minority (9%) and small Roman Catholic and Jewish communities.

Bulgaria is bounded to the north by the River Danube and Romania, to the east by the Black Sea, to the south by Turkey and Greece and to the west by Serbia and FYROM. The Balkan Mountains cross the country reaching to the edge of the Black Sea and its golden beaches.

Bulgaria has suffered the usual problems experienced by centrally-planned economies adjusting to market conditions. Since 1997 economic reform has been speeded up, most of industry and agriculture privatised, trade liberalised and reforms of the fiscal and banking system instituted. In 1997 a Currency Board was established and the Bulgarian Lev was pegged to the DEM, and now to the Euro. The major Bulgarian trade partner is the European Union (about 60%), followed by Russia, Germany, Italy and Greece. From Russia Bulgaria imports mainly crude oil and natural gas. Since the late 1990s, the trading relations of Bulgaria with the countries of the European Union have been noticeably intensified, in accordance with the country's political orientation.

II. DEFENCE BUDGETS - OVERVIEW (1999-2001)

Defence/GDP proportion. The estimates of the 2001 macroeconomics indicators for Romania show 4,2%-4,5% GDP real growth despite a 25-30% inflation rate, and a recovering economy after several years of recession. The year 2000 was a turning point with a 1,6% GDP growth rate, rebuilding of the official reserves and reduction in the current account deficit.
As depicted in Chart 1, over 1999-2001 Romanian defence costs have fluctuated around 2% of the country's gross domestic product. In 2001 they equal approximately 2,01% of GDP. Past fluctuations reflected the priority between defence and non-defence spending within the state budget but stability at approximately 2% of the annual GDP seems to have been achieved.

Total defence expenditures. Expressed in local currency Romanian statistics show a steady rise in the total defence expenditures for the 1999-2001 period, but this is largely due to inflation in the Romanian economy. Spending expressed in USD rose between 1999 and 2000 but levelled-off in 2001, as shown in Chart 2. (See also Table 1.)


Chart 2. Total Defence Expenditures (1999-2001)



Looking at the composition of spending, operating costs constitute between two-thirds and three-quarters of the total military expenditures through the period (See Table 2 and Chart 5), and are the largest component of the defence budget. In 2001 the personnel costs still exceed all the other operating expenses but there has been a substantial relative decrease of the personnel costs portion in comparison with that of the operation and maintenance costs. (See Chart 3.)


Chart 3. Restructuring of the operating costs (1999-2000)

The rise of the operation and maintenance spending has been generally driven by two of its components: 1) Materials for current use, and 2) Maintenance and repair. In 1999 these amounted to USD 90.5 million and USD 3.03 million respectively. In 2000 they reached USD 134.5 million and USD 76.0 million. The 25-fold increase of the maintenance & repair costs in 2000 compensates for the lack of additional resources for procurement at a time when renewal of large numbers of obsolete military machines and armaments is required.

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