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. 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).

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--see Glossary) 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.

Data as of January 1993