Escalating global geopolitical tensions are now clearly reflected in\nthe budgets of countries around the world. Amid ongoing wars in various\nregions, including the latest conflict in the Middle East between the\nUnited States (US) and Israel against Iran, many governments are\nchoosing to expand their military spending.<\/p>\n
The International Monetary Fund\u2019s (IMF) April 2026 report highlights\nthis widespread trend. Over the past five years, around half of the\nworld\u2019s countries have increased their defence budgets. By 2024, nearly\n40% of countries were allocating more than 2% of GDP to military\nspending, up from 27% in 2018.<\/p>\n
Moreover, sales of weapons by the world\u2019s 100 largest arms companies\nhave doubled over the past two decades.<\/p>\n
After a slowdown in the early 2000s and post-Cold War period, the\nupward trend in defence budgets has strengthened again, though the scale\nis somewhat smaller and the duration shorter compared to the Cold War\nera.<\/p>\n
Rising Military Spending, Defence Budget Surges Occurring More\nFrequently<\/p>\n
The global increase in military spending is not only more widespread\nbut also larger in scale. In its study of 164 countries since 1946, the\nIMF identified 215 major surges in defence spending. On average, these\nsurges last more than 2.5 years, with increases of around 2.7 percentage\npoints of GDP.<\/p>\n
This means the current situation is not just a routine budget\nincrease. In many countries, defence spending is rising on a large scale\nand persisting for a considerable time. Such trends have become more\nfrequent since the mid-2010s.<\/p>\n
The majority of these surges occur in developing countries. Around\n88% of all major defence spending increases come from emerging market\nand developing economies, particularly in the Middle East and Africa. In\nadvanced economies, defence budget increases are rarer but generally\nlarger and longer-lasting, especially when linked to wars.<\/p>\n
Global defence spending surges are not a fleeting phenomenon. Major\nincreases were common during the Cold War era and then subsided\nafterwards.<\/p>\n
However, in recent years, the pattern has re-emerged. This signals\nthat intensifying global geopolitics is truly pushing more countries to\nexpand their military budgets.<\/p>\n
Not Just Rising, the World is Also Bolder in Borrowing for Military\nSpending<\/p>\n
The global rise in military spending is also accompanied by changes\nin how it is financed. Defence spending surges in many countries are\ngenerally not supported by significant increases in government revenues.\nInstead, around two-thirds of the defence spending increases are\nfinanced through wider budget deficits.<\/p>\n
This pattern is most evident at the start of the rise. Most of the\nadditional military spending typically occurs in the first year, with\nnearly all of it completed within three years.<\/p>\n
During that phase, many governments opt for the quickest route:\nwidening the deficit. Additional government revenues do exist, but they\nare much smaller. Meanwhile, budget reallocations from other sectors\nonly become apparent later.<\/p>\n
On average, the primary deficit rises by around 1.1 percentage points\nof GDP in the first year and cumulatively approaches 2 percentage points\nof GDP by the third year. In contrast, additional government revenues\nare only about 0.2 percentage points of GDP in the first year and around\n1.2 percentage points of GDP overall.<\/p>\n
Around 39% of defence spending surges are primarily financed through\ndeficits, 35% through revenue increases, and 26% through reallocations\nfrom other expenditures. Nevertheless, deficits remain the primary\nsource of financing overall.<\/p>\n
The consequences quickly impact national finances. Within three\nyears, defence spending surges are on average followed by a rise in the\nfiscal deficit of around 2.6 percentage points of GDP and an increase in\ngovernment debt of around 6.6 percentage points of GDP.<\/p>\n
This shows that large military spending can quickly narrow fiscal\nspace, especially when much of the financing relies on debt and deficit\nexpansion.<\/p>\n
Defence Spending Can Boost the Economy in the Short Term, But There\nAre Still Consequences<\/p>\n
Rising defence spending can indeed provide a boost to the economy in\nthe short term.<\/p>\n
In non-war conditions, when military budgets increase, a country\u2019s\nreal output can rise by more than 3% compared to times without such\nsurges. This boost arises because higher military spending stimulates\ndomestic demand, through government consumption, household consumption,\nand investment.<\/p>\n
However, this boost does not come without costs. Behind the\nshort-term growth, there are several consequences to consider, from\nrising inflation and heavier fiscal burdens to deteriorating external\nbalances and the risk of reduced space for social spending.<\/p>\n
Surging defence spending can overheat the economy and drive up\nprices.<\/p>\n
In non-war conditions, defence budget increases are followed by a\nrise in the consumer price index of nearly 3.6% compared to normal\nconditions. Although this pressure is considered temporary, inflation\nremains one of the most tangible side effects of increased military\nspending.<\/p>\n
Pressure also emerges from the external sector. When defence spending\nrises, imports typically increase as well. This is not only due to\nstronger domestic demand but also because many countries purchase\nmilitary equipment from abroad. As a result, the current account balance\ntends to worsen. This risk is greater in countries where the defence\nindustry is not yet strong and still relies on imports of military\nhardware.<\/p>\n
There is also the risk of \u2018guns versus butter\u2019, where more of the\nnational budget is directed towards defence, while<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/imfs-stark-warning-the-world-is-going-mad-debt-swells-for-war-1776253859", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }