The coronavirus disease 2019 (COVID-19) pandemic has dramatically changed the world we inhabit. Not only has there been unimaginable human suffering worldwide, but the necessary protective measures implemented by governments around the world have caused an economic fallout far worse than the 2008–2009 financial crisis and unprecedented since the Great Depression of 1929. This crisis will impact the interpretation of the 2020 military expenditure data and should have an unexpected impact on its transparency, as this blog sets out to explain.
Economic consequences of the COVID-19 pandemic
Although a considerable amount of uncertainty remains about the economic landscape post COVID-19 and recovery from ‘the great lockdown’, the IMF has already predicted a global fall in gross domestic product (GDP) by at least 3 per cent. This unprecedented fall in GDP and the combination of government support packages and loss of tax revenue will place severe pressure on government budgets for years to come. This will lead to difficult choices for the allocation of resources and policy priorities.
On the one hand, although world military spending topped $1.9 trillion in 2019, the highest point since the end of the cold war, there were calls in the USA and in Europe to continue increases in military spending even at the height of the pandemic. The reasons for this range from perceived threats to military modernization and build-up plans.
On the other hand, the pandemic has emphasized the need for investment in non-military sectors. Economic support is needed to revitalize ailing sectors such as tourism, travel and entertainment, and COVID-19 has shown many countries’ lack of preparation in terms of healthcare and civil defence. Military spending could be affected by this shift in priorities, and from the austerity measures required to recover from the current economic crisis. For instance, following the 2008–2009 financial crisis, military spending fell in many European countries. In 2020, such austerity measures are not only more likely but could also happen on a wider scale—affecting advanced, developing and least developed countries.
Transparency in military expenditure and the COVID-19 pandemic
The impact of the COVID-19 pandemic on military spending has been debated to some degree by other think tanks, consultancies and the media. However, one aspect that has not been mentioned is whether there will be an accurate recording of this fall in military spending for the benefit of civil society, experts and policymakers, who want a better understanding of global developments. This challenge relates to the issue of transparency of information in military expenditure data and the role of governments in publishing their budgetary documents in a comprehensive manner.
Generally, there are three broad categories of budgetary documents that governments provide:
Prior to the start of the new fiscal year, an initial budget is adopted. This budget indicates the amount of resources a government plans to allocate to each governmental sector.
During the course of the fiscal year, a revised budget is released. This shows changes in a government’s priorities during the year.
After the end of the fiscal year, an actual expenditure document is published. This details exactly how much money has been allocated to each governmental sector.
In order to assess any type of government spending, the actual expenditure document is needed to understand the final outcomes. Comparing an initial budget to actual expenditure, especially post COVID-19, would also offer insights into the possible evolution of government priorities. How different would the pre-COVID-19 budget be compared to the post-COVID-19 actual expenditure?
However, a significant number of countries publish only an initial budget document. While in most years and countries the budget document would probably not differ by a large amount from the actual expenditure, this is likely to differ by a substantial amount in 2020 due to the impact of the COVID-19 pandemic. Based on SIPRI’s latest update of its Military Expenditure Database, of the 150 countries with relevant data and initial budget documents, only 77 publish revised budgets and 95 provide actual expenditure documents. Of the countries that do not publish either a revised or actual expenditure document, the majority are in Africa. Out of 45 African countries that publish a budget document, 29 do not make available a revised budgetary document and 28 provide no actual expenditure document. Similarly, only 6 of the 11 Middle Eastern countries with initial budgetary documents provide actual expenditures.
Lack of transparency and 2020 data interpretation
Since almost all initial budgets for the year 2020 were drawn up, voted on and passed in 2019, none of these takes into account the economic fallout of the COVID-19 pandemic. Therefore, for countries that publish only an initial budget, the 2020 spending figures will all be based on pre-COVID-19 conditions and will not show the possible cuts in spending or shifts in government priorities. This could lead to a substantial measuring error in these states’ military expenditure figures.
For countries with only an initial budget, the likely austerity measures due to COVID-19 will only be reflected in the 2021 budget (drafted and voted on in 2020). As a result, the data for 2020 could be misinterpreted as having an absence of austerity measures or a lack of shift in government priorities. This would be in contrast to those countries that provide revised and actual budgetary expenditure documentation. The 2020 statistical results from the military expenditure data will therefore contain an element of measurement error that will be hard to take into account—with various implications.
First, there is a risk of diverging regional trends in military spending. In regions such as Africa and the Middle East, military expenditure may appear to be rising, while in the Americas, Asia and Oceania, and Europe spending may appear be falling. A possible incorrect analysis of the data would be that countries in the West and in Asia and Oceania have cut military budget as a result of threat perceptions or a more severe economic crisis, whereas countries from other regions with developmental concerns, such as Africa, are keeping high levels of military spending in spite of it.
Second, without transparent and up-to-date information, countries could be falsely labelled as not prioritizing sectors such as health in the post-COVID-19 period. Military spending would still appear quite high in relation to many countries’ GDP, when in fact this might not be the case. This absence of accurate data may temporarily jeopardize the research on opportunity cost or determinants of military spending. This is particularly problematic as the allocation of resources by governments will be even more scrutinized after COVID-19. It is essential that institutes such as SIPRI, which openly provide military expenditure figures, obtain the most comprehensive and up-to-date information. The consequences of poor data resulting from a lack of military expenditure transparency are poor policy recommendations—and therefore possibly poor decisions.
Transparency and accountability in public spending post COVID-19
Comprehensive information on the resources dedicated to the military in 2020 will be available for around 60 per cent (95 countries) of the countries in the SIPRI Military Expenditure Database, including the major military spenders. However, for the one-third of the world’s countries that release budgets but no information on their actual spending, it is imperative—and will be even more so post COVID-19—to improve their national reporting of military expenditure and update such information on a regular basis. While improvements in military expenditure transparency have already been made in sub-Saharan Africa, as identified in a 2018 SIPRI policy paper, more can be done. The COVID-19 pandemic has wreaked havoc on the lives of billions of people, but in terms of transparency in military expenditure it may offer an ideal opportunity for governments to build trust with civil society. By making additional budgetary documents available, governments would show their willingness to engage more with their citizens, be more open to scrutiny and be held accountable for their spending decisions.
ABOUT THE AUTHOR(S)
Dr Nan Tian is a Senior Researcher and Acting Programme Director with the Military Expenditure and Arms Production Programme at SIPRI.
The coronavirus disease 2019 (COVID-19) pandemic has dramatically changed the world we inhabit. Not only has there been unimaginable human suffering worldwide, but the necessary protective measures implemented by governments around the world have caused an economic fallout far worse than the 2008–2009 financial crisis and unprecedented since the Great Depression of 1929. This crisis will impact the interpretation of the 2020 military expenditure data and should have an unexpected impact on its transparency, as this blog sets out to explain.
Economic consequences of the COVID-19 pandemic
Although a considerable amount of uncertainty remains about the economic landscape post COVID-19 and recovery from ‘the great lockdown’, the IMF has already predicted a global fall in gross domestic product (GDP) by at least 3 per cent. This unprecedented fall in GDP and the combination of government support packages and loss of tax revenue will place severe pressure on government budgets for years to come. This will lead to difficult choices for the allocation of resources and policy priorities.
On the one hand, although world military spending topped $1.9 trillion in 2019, the highest point since the end of the cold war, there were calls in the USA and in Europe to continue increases in military spending even at the height of the pandemic. The reasons for this range from perceived threats to military modernization and build-up plans.
On the other hand, the pandemic has emphasized the need for investment in non-military sectors. Economic support is needed to revitalize ailing sectors such as tourism, travel and entertainment, and COVID-19 has shown many countries’ lack of preparation in terms of healthcare and civil defence. Military spending could be affected by this shift in priorities, and from the austerity measures required to recover from the current economic crisis. For instance, following the 2008–2009 financial crisis, military spending fell in many European countries. In 2020, such austerity measures are not only more likely but could also happen on a wider scale—affecting advanced, developing and least developed countries.
Transparency in military expenditure and the COVID-19 pandemic
The impact of the COVID-19 pandemic on military spending has been debated to some degree by other think tanks, consultancies and the media. However, one aspect that has not been mentioned is whether there will be an accurate recording of this fall in military spending for the benefit of civil society, experts and policymakers, who want a better understanding of global developments. This challenge relates to the issue of transparency of information in military expenditure data and the role of governments in publishing their budgetary documents in a comprehensive manner.
Generally, there are three broad categories of budgetary documents that governments provide:
In order to assess any type of government spending, the actual expenditure document is needed to understand the final outcomes. Comparing an initial budget to actual expenditure, especially post COVID-19, would also offer insights into the possible evolution of government priorities. How different would the pre-COVID-19 budget be compared to the post-COVID-19 actual expenditure?
However, a significant number of countries publish only an initial budget document. While in most years and countries the budget document would probably not differ by a large amount from the actual expenditure, this is likely to differ by a substantial amount in 2020 due to the impact of the COVID-19 pandemic. Based on SIPRI’s latest update of its Military Expenditure Database, of the 150 countries with relevant data and initial budget documents, only 77 publish revised budgets and 95 provide actual expenditure documents. Of the countries that do not publish either a revised or actual expenditure document, the majority are in Africa. Out of 45 African countries that publish a budget document, 29 do not make available a revised budgetary document and 28 provide no actual expenditure document. Similarly, only 6 of the 11 Middle Eastern countries with initial budgetary documents provide actual expenditures.
Lack of transparency and 2020 data interpretation
Since almost all initial budgets for the year 2020 were drawn up, voted on and passed in 2019, none of these takes into account the economic fallout of the COVID-19 pandemic. Therefore, for countries that publish only an initial budget, the 2020 spending figures will all be based on pre-COVID-19 conditions and will not show the possible cuts in spending or shifts in government priorities. This could lead to a substantial measuring error in these states’ military expenditure figures.
For countries with only an initial budget, the likely austerity measures due to COVID-19 will only be reflected in the 2021 budget (drafted and voted on in 2020). As a result, the data for 2020 could be misinterpreted as having an absence of austerity measures or a lack of shift in government priorities. This would be in contrast to those countries that provide revised and actual budgetary expenditure documentation. The 2020 statistical results from the military expenditure data will therefore contain an element of measurement error that will be hard to take into account—with various implications.
First, there is a risk of diverging regional trends in military spending. In regions such as Africa and the Middle East, military expenditure may appear to be rising, while in the Americas, Asia and Oceania, and Europe spending may appear be falling. A possible incorrect analysis of the data would be that countries in the West and in Asia and Oceania have cut military budget as a result of threat perceptions or a more severe economic crisis, whereas countries from other regions with developmental concerns, such as Africa, are keeping high levels of military spending in spite of it.
Second, without transparent and up-to-date information, countries could be falsely labelled as not prioritizing sectors such as health in the post-COVID-19 period. Military spending would still appear quite high in relation to many countries’ GDP, when in fact this might not be the case. This absence of accurate data may temporarily jeopardize the research on opportunity cost or determinants of military spending. This is particularly problematic as the allocation of resources by governments will be even more scrutinized after COVID-19. It is essential that institutes such as SIPRI, which openly provide military expenditure figures, obtain the most comprehensive and up-to-date information. The consequences of poor data resulting from a lack of military expenditure transparency are poor policy recommendations—and therefore possibly poor decisions.
Transparency and accountability in public spending post COVID-19
Comprehensive information on the resources dedicated to the military in 2020 will be available for around 60 per cent (95 countries) of the countries in the SIPRI Military Expenditure Database, including the major military spenders. However, for the one-third of the world’s countries that release budgets but no information on their actual spending, it is imperative—and will be even more so post COVID-19—to improve their national reporting of military expenditure and update such information on a regular basis. While improvements in military expenditure transparency have already been made in sub-Saharan Africa, as identified in a 2018 SIPRI policy paper, more can be done. The COVID-19 pandemic has wreaked havoc on the lives of billions of people, but in terms of transparency in military expenditure it may offer an ideal opportunity for governments to build trust with civil society. By making additional budgetary documents available, governments would show their willingness to engage more with their citizens, be more open to scrutiny and be held accountable for their spending decisions.
ABOUT THE AUTHOR(S)