## Military Spending in the Post-Pandemic Era

## Source details

**Canonical URL:** [Military Spending in the Post-Pandemic Era](https://www.imf.org/en/publications/fandd/issues/2021/06/military-spending-in-the-post-pandemic-era-clements-gupta-khamidova)

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## Bibliographic details
- Authors: BENEDICT CLEMENTS, SANJEEV GUPTA, SAIDA KHAMIDOVA
- Published: June 1, 2021

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### Executive summary
- Military spending absorbed on average about 6½ percent of government budgets across the world in 2019, according to data from the Stockholm International Peace Research Institute.
- Worldwide military spending (unweighted country averages) declined from 3.6 percent of GDP during the Cold War period (1970–90) to 1.9 percent of GDP in 2010–19.
- Since the end of the Cold War in 1990, defense outlays have declined both as a share of government spending and of GDP, making room for spending on education, health, and infrastructure.
- The COVID-19 pandemic and accompanying budget support raised the average debt-to-GDP ratio by another 16 percentage points (IMF 2021), adding pressure for fiscal consolidation as pre-pandemic growth resumes.

### Trends and drivers of military spending
- Decline in military spending reflects multiple factors:
  - End of the Cold War and reduced international tensions.
  - Fiscal consolidation pressure in advanced economies, with average debt-to-GDP exceeding 100 percent in the period following the financial crisis.
  - Developing economies shifting budget shares to education, health, and infrastructure since the early 2000s.
  - Focus on achieving the United Nations Sustainable Development Goals, requiring major increases in human capital spending.
  - Rapidly aging populations in advanced economies increasing age-related spending pressures (Clements and others 2018).
- Heterogeneity across countries:
  - 83 countries spend less than 2 percent of GDP on defense.
  - 48 countries spend between 2 and 5 percent of GDP on defense.
  - 7 countries spend more than 5 percent of GDP on defense.
  - Several advanced economies are among the top 15 military spenders and account for more than 80 percent of military spending worldwide.

### Convergence analysis and country groupings
- Military spending relative to GDP is not converging to a single global level across 138 countries; instead, it follows three distinct paths (Clements, Gupta, and Khamidova 2021):
  - Group 1 (20 countries): High-conflict countries where military spending has risen substantially and diverged from the global trend. This group accounts for 5 percent of global military expenditure and includes Armenia, Azerbaijan, the Democratic Republic of the Congo, Oman, and Saudi Arabia.
  - Group 2 (77 countries, including 30 advanced economies): The largest group, accounting for more than 90 percent of global military spending, with outlays plateauing at about 2–2½ percent of GDP. This group includes China, India, Russia, the United Kingdom, and the United States; all are among the top 15 military spenders in absolute terms.
  - Group 3 (41 countries): Spending converges at slightly less than 1 percent of GDP. Only 2 countries in this group are advanced economies—Lithuania and Slovenia.

### Determinants of group membership and spending levels
- Factors increasing likelihood of higher military spending and membership in high-spending group(s):
  - High military spending by neighbors (perceived threat).
  - Significant political instability, violence, and terrorism within a country’s territory.
- Factors associated with lower military spending and membership in low-spending groups (groups 2 and 3):
  - Political stability and little risk of violence or terrorism.
  - High social spending.
  - Low military spending by neighbors.
- Membership in military alliances (such as NATO) does not have a discernible effect on military spending according to the analysis.
- The competition for limited budget resources is influenced by a country’s capacity to raise taxes; developing economies with potential to raise more taxes may face less fierce competition for resources than advanced economies.

### Implications for the post-COVID era and policy considerations
- For group 1 (conflict-driven spenders): Conflict has driven increases to a substantially higher 5 percent of GDP, implying that reducing internal and external conflicts could lower military spending and benefit economic growth and government budgets.
- For group 3 (primarily developing economies): Spending has fallen to relatively low levels (slightly less than 1 percent of GDP), reflecting limited security pressures or policy choices emphasizing other spending priorities.
- For group 2 (largest group, plateau at about 2–2½ percent of GDP): Two countervailing forces will shape future military spending:
  - Downward pressure from fiscal consolidation needs and the priority to maintain social spending.
  - Potential upward pressure if global tensions rise, as defense spending has recently plateaued rather than continuing to decline.
- Policy takeaway: Efforts to secure a more peaceful world by reducing internal and external conflicts carry positive economic side effects—reducing military spending pressures, supporting growth, and easing demands on government budgets.

*IMF F&D. "Military Spending in the Post-Pandemic Era." June 2021. Benedict Clements, Sanjeev Gupta, Saida Khamidova.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2021/06/military-spending-in-the-post-pandemic-era-clements-gupta-khamidova_