Sources and methods for SIPRI military expenditure data

This page describes the sources of and methods for producing the SIPRI military expenditure data as published in the SIPRI Yearbook and on this Internet site. The SIPRI database on military expenditure currently covers data for 167 countries. Data for the 10-year period 1997-2006 are presented in the SIPRI Yearbook 2007. Consistent data are available from 1988 in the SIPRI military expenditure database on line. The data series are not always consistent with the data for 1950-87, as published in previous SIPRI Yearbooks. The data are subject to continuous revisions and these revisions can be extensive. Significant changes are made to previously estimated figures. Entire series are revised when new and better sources come to light. As a result, there is sometimes considerable variation between data sets for individual countries in different Yearbooks. Conversion to constant US dollars has been made by the use of market exchange rates (MERs) for all countries (for details, see section IV and SIPRI Yearbook 2006, appendix 8E).

I. Purpose of the data

The main purpose of the data on military expenditure is to provide an easily identifiable measure of the scale of resources absorbed by the military. Military expenditure is an input measure which is not directly related to the 'output' of military activities, such as military capability or military security. Long-term trends in military expenditure and sudden changes in trend may be signs of a change in military output, but such interpretations should be made with caution.

Military expenditure data measured in constant dollars are a trend indicator of the volume of resources used for military activities, which allow comparisons to be made over time for individual countries and between countries. The share of gross domestic product (GDP) is a rough indicator of the proportion of national resources used for military activities, and therefore of the economic burden imposed on the national economy.

II. Sources

The sources for military expenditure data are, in order of priority: (a) primary sources, that is, official data provided by national governments, either in their official publications or in response to questionnaires; (b) secondary sources which quote primary data; and (c) other secondary sources.

The first category consists of national budget documents, defence white papers and public finance statistics published by ministries of finance and of defence, central banks and national statistical offices. It also includes government responses to questionnaires about military expenditure sent out by SIPRI, the United Nations or the Organization for Security and Co-operation in Europe (OSCE).

The second category includes international statistics, such as those produced by NATO and the International Monetary Fund (IMF). Data for most NATO countries are taken from NATO defence expenditure statistics as published in a number of NATO sources. Data for many developing countries are taken from the IMF's Government Financial Statistics Yearbook, which provides a defence line for most of its member countries. This category also includes the publications of other organizations which provide proper references to the primary sources used. The three main sources in this category are the Europa Yearbook (Europa Publications Ltd, London), Country Reports of the Economist Intelligence Unit (London), and Country Reports by IMF staff.

The third category of sources consists of specialist journals and newspapers.

III. Definition of military expenditure

Although the lack of sufficiently detailed data makes it difficult to apply a common definition of military expenditure on a worldwide basis, SIPRI has adopted a definition as a guideline. Where possible, SIPRI military expenditure data include all current and capital expenditure on: (a) the armed forces, including peacekeeping forces; (b) defence ministries and other government agencies engaged in defence projects; (c) paramilitary forces, when judged to be trained and equipped for military operations; and (d) military space activities. Such expenditures should include: (a) military and civil personnel, including retirement pensions of military personnel and social services for personnel; (b) operations and maintenance; (c) procurement; (d) military research and development; and (e) military aid (in the military expenditure of the donor country). Civil defence and current expenditures on previous military activities, such as veterans' benefits, demobilization, conversion and weapon destruction are excluded.

In practice it is not possible to apply this definition for all countries, since this would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. In many cases SIPRI cannot make independent estimates but is confined to using the national data provided. Priority is then given to the choice of a uniform definition over time for each country in order to achieve consistency over time, rather than to adjusting the figures for single years according to a common definition. In cases where it is impossible to use the same source and definition for all years, the percentage change between years in the deviant source is applied to the existing series in order to make the trend as accurate as possible. In the light of these difficulties, military expenditure data are not suitable for close comparison between individual countries and are more appropriately used for comparisons over time.

IV. Methods

Estimates and the use of brackets

SIPRI data reflects the official data reported by governments. As a general rule, SIPRI takes national data to be accurate until there is convincing information to the contrary. Estimates are made primarily when the coverage of official data does not correspond to the SIPRI definition or when there are no consistent time series available. In the first case, estimates are made on the basis of an analysis of official government budget and expenditure accounts. The most comprehensive estimates, for China and Russia, have been presented in detail in previous Yearbooks. In the second case, differing time series are linked together. In order not to introduce assumptions into the military expenditure statistics, estimates are always based on empirical evidence and never based on assumptions nor extrapolations. Thus, no estimates are made for countries which do not release any official data. These countries are displayed without figures.

SIPRI estimates are presented in square brackets in the tables. Round brackets are used when data are uncertain for other reasons, such as the reliability of the source or because of the economic context. Figures are more unreliable when inflation is rapid and unpredictable. Supplementary allocations made during the course of the year to cover losses in purchasing power often go unreported and recent military expenditure can appear to be falling in real terms when it is in fact increasing.

Data for the most recent years include two types of estimate which apply to all countries: (a) figures for the most recent years are for adopted budgets, budget estimates or revised estimates, and are revised, more often than not, in subsequent years; and (b) the deflator used for the latest year in the series is an estimate. Unless exceptional uncertainty is involved with these estimates, they are not bracketed.

Calculations

The SIPRI military expenditure figures are presented on a calendar-year basis. The only exception is the USA, for which statistics report data on a fiscal-year basis. Calendar-year data are calculated on the assumption of an even rate of expenditure throughout the fiscal year.

The deflator used for conversion from current to constant prices is the consumer price index (CPI) of the country concerned. This choice of deflator is linked to the purpose of the SIPRI data – that they should be an indicator of resource use on an opportunity cost basis.

Beginning with the data in the SIPRI Yearbook 2003, conversion to constant dollars is carried out for all countries using the average MER. Previously, data for countries in transition and for North Korea were converted by use of the purchasing power parity (PPP) conversion rate. The reasons for abandoning the PPP conversion method are methodological consistency and simplicity. The PPP rate is superior to the MER for international comparison of resource consumption in these countries, and even more so for other countries, especially developing countries. Thus, the ideal approach would be to use PPP rates for all countries. This is, however, not possible because currently available PPP data are still not sufficiently reliable for all countries in the SIPRI database. Furthermore, PPP data for non-OECD countries are not regularly updated, which means that comparable PPP rates are not available for recent years. Therefore, MERs will be used for all countries until more reliable and updated PPP data become available.

The change from PPPs to MERs for countries in transition has resulted in a significant downward shift in the level of military expenditure for these countries. For example, Russian military expenditure converted using PPP rates ($82.8 million in 2006) is 2.4 times higher than in MER dollars ($34.7 million in 2006).

The choice of base year—the year in whose prices the data are expressed—also has a significant impact on cross-country comparisons of expenditure data because different national currencies vary against the dollar in different ways. Beginning with the data in the SIPRI Yearbook 2007, the base year has been changed to 2005, having previously been 2003. The most salient effect of this change is the decrease in the USA's share of 2005 total world military expenditure from 48 per cent using 2003 as the base year to 46 per cent when expressed in 2005 prices and exchange rates. The change of base year and the decline in the value of the US dollar in relation to other currencies over recent years also have an impact on the regional shares of total world military expenditure. For Europe, the region where currencies gained most against the dollar, the shift in base year from 2003 to 2005 has resulted in an increase of approximately 2.1 percentage points in the region’s share of world military spending.

The ratio of military expenditure to GDP is calculated in domestic currency at current prices and for calendar years.

Economic groupings used are based on figures for 2005 Gross National Income (GNI) per capita as calculated by the World Bank and presented in its World Development Indicators 2007. For the purpose of calculating aggregate totals, estimates have been made for countries for which data are lacking in some years. These estimates are made on the assumption that the trend for these countries is the same as for the geographical region in which they are located.

For information on countries included in the geographical regions see Regional coverage