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Latest data: Military expenditures stabilize during 1999; variations persist in different regions

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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Worldwide military spending fell steadily in the 1990s as a share of world output. The latest IMF World Economic Outlook data for 131 countries show that these expenditures stabilized at approximately 2.1 percent of GDP in 1999 (see table, page 176). Other data sources confirm this trend. According to the International Institute for Strategic Studies (IISS), worldwide military spending leveled off at 2.5 percent of GDP in 1998. Stockholm International Peace Research Institute (SIPRI) data show a slight reduction in worldwide military spending to 2.1 percent of GDP in the same year. An important reason for differences in the estimates of worldwide military spending among different data sources is variations in data coverage.

Military spending patterns

As reported in previous reviews in the IMF Survey (June 7, 1999, page 186, and May 11,1998, page 149), important variations remain in military spending patterns across regions (see chart, this page). World Economic Outlook data show that military spending increased in 1999 as a share of both GDP and total government outlays in the industrial countries, Africa, and the Baltic countries, Russia, and the other countries of the former Soviet Union. The increase in military spending in Africa is confirmed by both SIPRI and IISS. According to IISS, military spending increased as a share of GDP in Asia and in the Middle East in 1998. Military spending remains the lowest among all regions in the Western Hemisphere, at 1.2 percent of the region’s GDP and 5.4 percent of total government spending.

In IMF-supported programs and policy dialogue with member countries, considerable emphasis is placed on how to reduce unproductive spending (for example, “white elephant” projects, generalized subsidies, transfers to loss-making public enterprises, among others). In a sample of 64 countries that have had IMF-supported programs for more than two years, military outlays stabilized at 1.7 percent of GDP in 1998—99, following a steady decline from over 2.0 percent of GDP in 1995. Defense outlays remain higher in countries with Poverty Reduction and Growth Facility (PRGF) arrangements than in other IMF-program countries, particularly as a share of total government spending. In these countries, military spending is also higher than the world average as a share of GDP. In heavily indebted poor countries, despite a lower-than-average share of spending in GDP, military outlays account for the highest share in total government spending among all regions, except the newly industrialized Asian economies and the Middle East.

Armed conflicts

The increase in military spending in some regions may be attributed to the eruption of armed conflicts. Comprehensive definitions of such conflicts are difficult and not without limitations. For instance, SIPRI defines a major armed conflict “as a prolonged combat between the military forces of two or more governments, or of one government and at least one organized armed group, and incurring the battle-related deaths of at least 1,000 people during the entire conflict. A conflict location is the territory of a state.” Taking SIPRI’s definition, for the world as a whole, the number of conflicts fell to 26 in 1998, against 31 in 1990. Since 1996, the number of armed conflicts has stabilized or fallen in all regions with the exception of Africa, where it more than doubled. In 1998, Africa had the highest number of armed conflicts (11), followed by Asia (8) and the Middle East (4).

Military expenditures

(percent of GDP)

Note: Weighted by country GDP.

1 Includes Cyprus, Malta, and Turkey.

Data: IMF, World Economic Outlook

Arms imports have increased worldwide

Increases in arms imports also explain the rise in military spending in some regions. Data for 136 countries reported by the U.S. Arms Control and Disarmament Agency show that worldwide arms imports accounted for approximately 0.2 percent of GDP in 1997, against 0.1 percent in 1996. Information on arms imports, and defense procurement in general, should be interpreted with caution. Defense contracts are often drawn up in secrecy, and the payment for arms imports may not always be recorded as defense outlays or subject to standard budget oversight.

Notwithstanding these problems, there are important variations in arms imports patterns across regions. In the newly industrialized Asian countries, imports of arms and military equipment almost tripled to 1.3 percent of GDP between 1996 and 1997.

In the Middle East, arms imports reached 2.9 percent of GDP in 1997, an increase of 0.3 percentage point relative to 1996, and remain the highest among all regions. Spending on arms imports is the lowest in the Western Hemisphere, at 0.1 percent of GDP. The share of arms imports in GDP is in line with the world average in the sample of IMF program countries, but is almost twice the world average in PRGF countries.

Military expenditures
199019951996199719981999199019951996199719981999Change

1998–99
Number of

countries
(percent of GDP)1(percent of total expenditure)(billion dollars)
World Economic Outlook2
All countries3.42.32.32.22.12.114.210.710.610.39.610.030.5131
Advanced economies3.32.42.42.22.12.214.310.610.710.49.610.337.125
Industrial countries3.32.32.32.22.02.114.110.410.410.19.410.134.422
Newly industrialized Asian economies34.33.33.63.53.63.425.118.919.017.717.015.72.73
Developing countries2.52.22.12.02.12.012.011.310.710.19.79.2-1.586
Africa3.42.52.32.32.12.312.49.08.68.57.88.20.643
Asia2.11.71.51.41.41.410.611.310.39.28.77.91.511
Middle East6.66.66.56.56.56.321.221.820.220.319.719.00.312
Western Hemisphere1.21.31.31.21.31.27.16.76.56.16.05.4-3.920
Countries in transition6.02.62.42.52.02.115.910.19.410.18.28.4-5.020
Central Europe2.32.31.91.92.12.011.47.06.36.37.26.1-3.67
Baltics, Russia, and other Former Soviet Union6.92.82.62.81.82.116.413.812.113.49.611.2-1.413
Countries with IMF programs
for more than two years4.32.12.01.91.71.714.39.79.38.77.67.5-5.764
PRGF countries5.23.83.53.33.13.110.014.813.913.712.813.1-0.335
HIPCs3.92.62.32.21.81.815.915.414.013.611.811.70.633
ACDA
All countries3.62.62.62.7107
Africa3.63.03.03.032
Asia6.04.94.85.212
Middle East11.67.06.86.812
Western Hemisphere1.61.61.71.7
HIPCs4.34.24.04.225
SIPRI4
All countries3.32.42.42.32.196
Africa3.52.52.32.12.326
Asia2.62.12.02.12.110
Middle East7.85.95.66.36.314
Western Hemisphere1.11.31.11.41.314
HIPCs4.73.02.42.23.318
IISS
All countries3.12.62.52.52.589
Africa2.82.92.82.93.116
Asia3.13.53.43.33.514
Middle East10.07.67.57.48.011
Western Hemisphere0.71.51.82.22.217
HIPCs5.12.82.62.42.114
Note: HIPCs = heavily indebted poor countries; ACDA = (U.S.) Arms Control and Disarmament Agency; SIPRI = Stockholm International Peace Research Institute; and IISS = International Institute for Strategic Studies

Weighted by country GDP.

For 1990, the sample size is 127; for 1999, it is 128.

Includes Korea, Singapore, and Taiwan Province of China.

For 1997, the sample contains 89 countries, and for 1998, 70 countries.

Data: IMF, World Economic Outlook; ACDA, World Military Expenditures and Arms Transfers; SIPRI, SIPRI Yearbook, Armaments, Disarmament and International Security; and IISS, The Military Balance

Note: HIPCs = heavily indebted poor countries; ACDA = (U.S.) Arms Control and Disarmament Agency; SIPRI = Stockholm International Peace Research Institute; and IISS = International Institute for Strategic Studies

Weighted by country GDP.

For 1990, the sample size is 127; for 1999, it is 128.

Includes Korea, Singapore, and Taiwan Province of China.

For 1997, the sample contains 89 countries, and for 1998, 70 countries.

Data: IMF, World Economic Outlook; ACDA, World Military Expenditures and Arms Transfers; SIPRI, SIPRI Yearbook, Armaments, Disarmament and International Security; and IISS, The Military Balance

Ian S. McDonald

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