Although the national budget and government expenditure have never been a secret in Myanmar, any attempt to calculate Myanmar defence expenditure is fraught with peril. This is particularly true since 1988. The published figures are unreliable. Besides, there are several other factors that should be considered in calculating Myanmar defence expenditure. First, the defence expenditure itself is underestimated. There is heavy state subsidization coming from other ministries and agencies, rather than the Ministry of Defence. For example, the armed forces get subsidized fuel from Ministry of Energy. Second, some of the expenditure in foreign currencies is calculated on the basis of the official exchange rate, which is more than 200 times lower than the market rate in early 2000s. Third, some expenditure comes from other agencies, such as home affairs and forestry. And fourth, some expenditures are paid by military businesses. Finally, some expenditures, such as payment for overseas suppliers, are made in kind under a barter system. (Some claim that some of the military hardware bought from the PRC are paid for in teak and other natural resources.)

Defence Expenditure

Financing the force modernization programme in Myanmar has always been a major issue. The defence budget takes the lion's share in the Total Government Expenditure (TGE) or Central Government Expenditure (CGE). In the first two years immediately after the nation's independence in 1948, the defence expenditure in momentary terms amounted to 40 per cent of the TGE. And it remained relatively high throughout 1950s — about 32 per cent of the TGE. Between 1948 and 1961, the Myanmar government spent Kyat 4,067.7 million (in current price terms) or Kyat 880.8 million (in 1960 constant price) on the defence. This budget was used mostly for equipment, salaries, rations, and medical facilities for the troops. The calculation of the percentage of defence expenditure to the TGE or CGE was simply for the period between 1948 and 1962 when there was little state-owned economic enterprises (SEE). In the early 1950s, the Tatmadaw found a way to provide welfare services for its members and their families; it established a number of business firms, including stores to sell subsidized commodities for Tatmadaw members. The issue of military business will be discussed later in the chapter.