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Military spending and development aid after the invasion of Ukraine

Photo: Shutterstock
Photo: Shutterstock

Russia’s full-scale invasion of Ukraine in 2022 has had impacts on human security and military threat perceptions reaching far beyond Ukraine itself. In many developing countries it has contributed to high inflation, insecurity and food supply crises, with grave human security consequences. In 2022 the member countries of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) increased flows of official development assistance (ODA) by 14 per cent ($24.4 billion) in real terms, reaching a record $204 billion. In the same period, their combined military spending rose by 1.4 per cent ($19.4 billion), reaching $1.36 trillion (see figure 1).

The concurrent increases in ODA and military spending might at first glance suggest a balanced response to heightened threat perceptions and the growing needs of developing countries. However, a deeper look at the data reveals a more complex picture.

In making spending decisions, governments must always balance a wide range of priorities, including past commitments, domestic programmes, future risks and unforeseen developments. It is natural for them to reconsider these priorities during crises. Public scrutiny of government spending decisions is an essential part of the democratic process. To inform public reflection and discussion, this topical backgrounder aims to shed more light on how DAC members’ spending patterns changed after February 2022. It focuses on military spending and ODA contributions by 30 DAC member countries in 2022. 

Two DAC members are excluded from the analysis: Estonia, because it did not join the DAC until 2023, and the European Union, as including it would mean double-counting of EU member states’ contributions. Unless otherwise stated, all spending figures for 2022 are given in 2022 current US dollars. Relative increases or decreases in spending are expressed in real terms using constant (2021) US dollars.

Military spending, military aid and domestic priorities

Although many DAC members had already increased their military expenditure in response to Russia’s annexation of Crimea in 2014, the events of February 2022 pushed perceived threat levels even higher. As a result, many DAC members, especially those geographically close to Russia and Ukraine (notably Finland, Germany, Lithuania, Poland and Sweden), accelerated and increased their military spending plans (see figure 2).

A part of the increase in the DAC members’ military spending is accounted for by military aid to Ukraineincluding both equipment and financial aid. SIPRI estimates that Ukraine received at least $30 billion in financial military aid in 2022, the largest amount received by a single country in a single year to date. The bulk of this came from DAC members, with the United States alone providing $19.9 billion.

The sheer volume of this military aid demonstrates the priority DAC members gave to Ukraine’s self-defence. Before 2022, Ukraine consistently received considerably more ODA than financial military aid from DAC members in aggregate, and neither figure ever passed $1 billion in a single year. In 2022, although both figures rose sharply, the amount of military aid flowing to Ukraine from the DAC members was 86 per cent greater than their ODA contributions to the country.

With financial resources limited, governments looking to boost one category of spending generally need to make trade-offs with other categories, including ODA. Figure 3 shows how military spending by DAC members compared with their spending on ODA as well as with international commitments and funding gaps related to other aspects of human and environmental security.

The shifts in DAC members’ spending priorities look set to continue. In Finland, for example, in the 2023 budget the budget line for the Ministry of Defence grew substantially, while there were real-terms cuts in the budgets for the ministries of Education and Culture; Agriculture and Forestry; Transport and Communications; Environment; and Labour and the Economy.

In Sweden, spending on the budget line ‘defence and society’s crisis preparedness’, which includes military spending, is forecast to increase by 6.9 per cent in real terms between 2022 and 2023 while allocations decrease to ‘health, medical and social care’ (–13 per cent); to ‘energy’, which includes support for green energy production (–64 per cent); to ‘climate, environment and nature’ (–11 per cent); and to ‘financial security for those with illnesses and disability’ (–11 per cent).

Changes in the allocation of official development assistance

The trend in ODA contributions by DAC members in recent years has run parallel with their military spending. Their combined ODA broke new records for four consecutive years up to 2022, and the 14 per cent increase in 2022 was one of the highest year-on-year rises ever recorded by this group of donors. ODA contributions by 26 of the 30 DAC member countries increased, including the group’s four largest military spenders: the USA (+8.2 per cent), the United Kingdom (+6.7 per cent), Germany (+12 per cent) and France (+13 per cent).

While increasing aid to Ukraine and providing support for those displaced by the conflict are needed and justified, the amounts allocated for these purposes significantly altered the pattern of DAC members’ ODA allocations. Of the $204 billion in ODA provided by DAC members in 2022, more than $16.1 billion went in development aid to Ukraine (of which $1.8 billion was humanitarian aid), a 1618 per cent increase from 2021. Another $29.3 billion was reported by DAC members as ‘in-donor refugee costs, an increase of around 135 per cent compared with 2021, most likely driven by the arrival of millions of Ukrainians who fled the country after the full-scale invasion.

Together, these payments significantly outweigh the increase in overall ODA flows. If ODA payments to Ukraine are excluded, the 8.2 per cent increase in net ODA contributions by the largest ODA provider, the USA, becomes an 8.8 per cent decrease in real terms. In addition, without ODA to Ukraine and in-donor refugee costs, net ODA flows by DAC member countries would turn from a 15 per cent increase to a 2.2 per cent decrease, and ODA contributions from 16 of the 30 DAC member countries would decline in 2022.

Prior to February 2022, the DAC members had predominantly directed ODA towards conflict-affected countries in sub-Saharan Africa and the least-developed countries (LDCs). Ukraine received only minimal amounts of ODA. Between 2021 and 2022 Ukraine’s share of the total increased from around 0.5 per cent of the DAC members’ ODA contributions to 7.8 per cent. In the same period, net ODA to sub-Saharan Africa declined by 7.8 per cent, to $29 billion. The increase in aid to Ukraine also meant that, at $47 billion, the share of DAC members’ ODA payments going to lower-middle income economies (of which Ukraine is one) was bigger than that going to low-income countries in 2022; net flows to LDCs fell by 0.7 per cent to reach $32 billion.

The high level of ODA support to Ukraine and Ukrainians fleeing the war is expected to continue in the coming years; reports indicate that Ukraine is set to divert all government spending to the military, while the country’s social expenditures will be covered by Ukraine’s allies.

A sharp increase in ODA allocations towards regions or countries newly in crisis is not a new phenomenon. For example, in 2013 the intensification of the Syrian conflict led to a threefold increase in the ODA from DAC member countries to Syria, primarily due to a surge in humanitarian assistance. There was also a fourfold increase in in-donor refugee costs between 2012 and 2016, the previous peak year for such costs. There were, however, two important differences between 2012–16 and 2022. First, the ODA sent to Syria in 2013 was only around 12 per cent the amount sent to Ukraine in 2022 and reported in-donor refugee costs in 2016 were only 62 per cent of what they were in 2022. Second, the increase in ODA to Syria was not accompanied by a drop in aggregate ODA to sub-Saharan Africa or to the LDCs.

Balancing military and other human security imperatives

The demand for humanitarian and development funding and the perceived need for military spending both reached their highest points in recent years during 2022, and both increased even further in 2023. Support to Ukraine—both military and in the form of ODA—is crucial to the country’s defence against an illegal invasion and to providing humanitarian relief to those directly affected by the conflict.  At the same time, a surge in armed conflicts, geopolitical tensions, economic shocks and natural disasters beyond Ukraine is challenging an already overstretched global aid system. As a result, donors are forced to make difficult decisions about where and how to direct their spending: to domestic military and non-military spending; to military aid; or to support development (including climate finance) and humanitarian relief to countries that need it, including Ukraine and other fragile and conflict-affected countries such as Ethiopia, Myanmar and Yemen. Another major humanitarian catastrophe is unfolding in Gaza, where the need for both humanitarian and development aid is already great and will only increase.

Despite the growing need for ODA, only five DAC members allocated 0.7 per cent or more of their gross national income (GNI) to ODA in 2022: Luxembourg, Sweden, Norway, Germany and Denmark. The target level of at least 0.7 per cent of GNI was agreed by the United Nations General Assembly in 1970 and has been reiterated several times since, including in the 2015 Sustainable Development Goals and the 2015 Addis Ababa Action Agenda. The current average across the DAC members is just over half that level. With no end to the various conflicts and humanitarian crises in sight, one way to keep up with the need for ODA is for all the DAC members to reach the 0.7 per cent target, as well as the subsidiary target of giving ODA worth 0.15 to 0.2 per cent of GNI to LDCs.

In the years ahead, donor governments are likely to be confronted with an increasingly delicate task in balancing spending priorities. More conflicts and rising geopolitical tensions are likely to drive up their military spending. Domestic programmes will need funding; for example, essential services and building resilience to new risks, including environmental risks. At the same time, economic challenges stemming from the Covid-19 pandemic and the war in Ukraine—exacerbated by other emerging sources of insecurity such as trade disruptions in the Red Sea—will likely constrain the resources available.

Instead of viewing military security, development cooperation and domestic spending as mutually exclusive, competing priorities, a more constructive approach is to explore the links between them: how spending on the one may support (or hinder) progress on the others. The right balance is the one best suited to achieving human, environmental and national security, now and in the longer term.

ABOUT THE AUTHOR(S)

Xiao Liang is a Researcher in the SIPRI Military Expenditure and Arms Production Programme.
Dr Nan Tian is a Senior Researcher and Acting Programme Director for the Military Expenditure and Arms Production Programme at SIPRI.