The military budget underwent a series of reductions in the late 1980s because of the country's worsening economic problems. The 1987 estimated military budget, based on Ministry of Finance information, was US$867 million (40.745 billion forints). The 1989 budget was cut to US$576 million (40.3 billion forints) even before January 1, 1989. The proportion of the military budget devoted to the acquisition of new technology dropped from 32 percent in 1988 to 16 percent in 1989. From 1980 to 1985, this proportion had averaged about 50 percent of the military budget.

In the late 1980s, the Soviet Union and other Warsaw Pact countries expressed displeasure with the relatively low Hungarian defense budget, but this pressure did not induce the Hungarians to increase the percentage of the gross domestic product (GDP--see Glossary) devoted to defense. Only Romania spent a smaller percentage of GDP on national defense than Hungary, but in absolute numbers Hungary's outlay was the smallest in the Warsaw Pact.

By contrast, the funds spent by the government for armed forces subject to the Ministry of Interior and the Workers' Guard increased by nearly 22 percent from 1987 to 1988 and by nearly 24 percent from 1988 to 1989. Much of this increase, however, was expected to be canceled out by inflation and price reform.

The budget for the defense and interior ministries had to be approved by the defense committee of the National Assembly, a body that managed to increase its power during the late 1980s. Nevertheless, in 1989 the committee once again approved the state budgets for the ministries of defense and interior and, for the first time, the Workers' Guard, without inquiring about how the money was to be spent.

Data as of September 1989