The independent resource on global security

Sources and methods

The SIPRI database on military expenditure currently covers data for 173 countries for the period 19882015. A longer consistent data set, in some cases going back to 1949, is available on request from SIPRI. The data is subject to continuous revisions, which can be extensive, for example when new and better sources come to light.

Quick links:

  1. Purpose of the data
  2. Sources
  3. Definition of military expenditure
  4. Methods
  5. SIPRI estimates for China
  6. The SIPRI Military Expenditure and Arms Production Expert Network
  7. Calculations

 

1. 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 trends may be signs of a change in military output, but such interpretations should be made with caution.

Military expenditure data measured in constant dollars is 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.

2. 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 ministries 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), and expert analyses of government budgets by members of the SIPRI Military Expenditure and Arms Production Expert Network (see below).

The second category includes international statistics, such as those produced by NATO and the International Monetary Fund (IMF). Data for most NATO countries is taken from NATO defence expenditure statistics as published in a number of NATO sources. Data for many developing countries is 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 that 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.

 

3. 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.

This should include expenditure on:

i. personnel, including:

        a. salaries of military and civil personnel;

        b. retirement pensions of military personnel, and;

        c. social services for personnel;

ii. operations and maintenance;

iii. procurement;

iv. military research and development;

v. military infrastructure spending, including military bases. and;

vi. 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, and in many cases SIPRI 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 the light of these difficulties, military expenditure data is most appropriately used for comparisons over time, and may be less suitable for close comparison between individual countries. Reference should always be made, when comparing data for different countries, to the footnotes and special notes attached to the data for these countries, which indicate deviations from the SIPRI definition, where these are known.

 

4. Methods

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 that cover the entire period covered by the data.

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 SIPRI Yearbooks. Other countries where the entire series is estimated are Israel and the United Arab Emirates.

In the second case, differing sources, covering overlapping time periods, are linked together to produce a longer series. Where these sources follow different definitions leading to systematic differences in their levels, one series (the ‘primary’ source) is used directly without adjustment, while the percentage change between years in the other source (the ‘secondary’ source) is applied either forwards or backwards from the primary source series, in order to make the trend as accurate as possible. In selecting the primary source, preference is given to (a) the source most closely matching the SIPRI definition, (b) the most recent source, and (c) the source with the longest continuous series of data, although in many cases it is only possible to achieve two out of three of these criteria.

In order not to introduce assumptions into the military expenditure statistics, estimates are always based on empirical evidence and never based on assumptions or extrapolations. Thus, no estimates are made for countries that do not release any official data. These countries are displayed without figures.

In SIPRI publications, estimates are presented in square brackets in the tables. Round brackets are used when data is 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 often revised 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.

 

5. SIPRI estimates for China

In its estimates of Chinese military expenditure, SIPRI seeks to take into account a number of sources of military expenditure outside the official defence budget. Such sources of military expenditure include funding from other central government ministries (some of which is publicly available, some of which is not), funding from local government and funding from internal People's Liberation Army (PLA) sourcesthe latter probably represents a much smaller share of the total than in the past. SIPRI's estimate of China's military spending is based on a methodology used in a study published in SIPRI Yearbook 1999, which provides estimates of Chinese military spending from 19891998, based on both the official defence budget and data and estimates for a number of items outside the budget (see below). [1]

SIPRI's estimates for China continue to be based on Professor Wang's methodology, adapted over time as new information has become available, or in some cases where data series have ceased to be available. The figures come from the official defence budget, and estimates for the additional items identified by Professor Wang. These are based on additional data from various editions of the China Public Finance Yearbook, the China Statistical Yearbook and other official publications, but also in some cases require additional estimation for more recent years, where the data series used by Professor Wang are no longer available.

The items outside the official defence budget that are included in the estimates are:

(a) spending on the paramilitary People's Armed Police (PAP);

(b) soldiers' demobilization and retirement payments from the Ministry of Civil Affairs;

(c) subsidies to the arms industry;

(d) additional military research, development, testing and evaluation (RDT&E) funding outside the national defence budget;

(e) additional military construction expenses;

(f) Chinese arms imports; and

(g) residual military-owned enterprises.

Professor Wang included one additional item, namely an estimate for PLA revenues from arms exports. However, to avoid the risk of double-counting, this item (which was a very small part of the total) has been removed. These figures and estimates are derived as follows:

  • The figures for the PAP come from published expenditure figures up to 2014, while the figures for 2015 is estimated based on the rate of change of the Public Security budget.
  • The figures for demobilization payments come from published expenditure figures up to 2012, with the figures for 201315 estimated based on the rate of change of the official budget.
  • Estimates for subsidies to the arms industry are based on a share of the total budget for industrial subsidies. From 2005, this share is assumed to have declined due to the increasing profitability of most of the arms industry in China, and to have been zero from 2010 onwards.
  • Estimates for additional military RDT&E from 20072015 are based on a share of total Central Government appropriations for Science & Technology (S&T). The share is based on information for 20112014 on the proportion of the S&T budget that is allocated to civilian agencies that disclose their spending in annual reports. The remainder is assumed to be allocated to the agencies that do not disclose annual reports, with military and security significance, and it is estimated that 90% of this is for military purposes. The estimates for 19972006 are based on a slightly smaller share of a previous series for Central Government S&T appropriations, which used a different classification system, giving somewhat higher figures than the new system. The estimates up to 1996 are Professor Wang’s estimates, and are based on a share of overall government Research and Development and Science and Technology budget.
  • Estimates for additional military construction are based on a share of the government's capital infrastructure budget. As these figures are not published beyond 2006, estimates for 20072015 are based on the average growth rate of this budget over the previous 5 years; estimates for arms imports use figures provided by Russia for the value of arms transfers to China for the years where this information is available, as Russia accounts for the vast majority of Chinese arms imports. For the years where these figures are not available, the estimates are based on the rate of change of China's arms imports as measured by the SIPRI Trend Indicator Value (TIV).
  • Income from commercial activities of the PLA is assumed to have declined steadily since 1999, as a policy of divestment from such activities has been followed. The figures for 198998 are Professor Wang’s, and are based on a share of the official defence budget.

The resulting SIPRI estimates for Chinese military spending for recent years come to around 1.5 times the official defence budget for most years.

A 2006 report by the US-China Policy Foundation, based on a analysis of available Chinese-language sources, broadly concurs with the list of items included by SIPRI, but also adds various additional forms of funding to the PLA from local government, as well as some higher education expenses for PLA officers and compensation for disaster relief activities. The report concludes, however, that there is not at present enough information to make a reasonable estimate of total Chinese defence-related spending.

While details of some elements of Chinese military spending outside the official defence budget are publicly available (such as the PAP budget) othersmost importantly R&D spendingare not, and can at present only be the subject of educated guesswork. Further research based on publicly available Chinese-language sources could provide improved estimates, but without greater transparency on the part of the Chinese Government, a completely accurate figure is not currently possible.

 

6. The SIPRI Military Expenditure and Arms Production Expert Network

SIPRI's efforts to gather reliable military expenditure data (as well as data on the arms industry) are assisted by the SIPRI Military Expenditure and Arms Production Expert Network, an international network of experts associated with the SIPRI Military Expenditure and Arms Production Programme.

Network members provide SIPRI with regular data on the military expenditure or arms industry of specific countries on which they have a particular expertise (most often, though not always, their own). In addition, SIPRI will from time to time consult with members of the network on specific issues relating to their areas of expertise. Network members receive a small annual honorarium in return for the provision of data. This is typically $150500, depending on the volume of data supplied. In addition, they receive a copy of each edition of the SIPRI Yearbook to which they have contributed data. They are also credited for their contribution in the relevant section of the Yearbook.

The SIPRI Military Expenditure and Arms Production Programme periodically seeks new members of the network for countries where new or improved sources of data are considered necessary, or where we become aware of relevant potential network members who could provide such improved data. Potential network members must fulfil the following requirements:

  • Education to Masters Degree level or equivalent.
  • Evidence (through relevant publications or otherwise) of a detailed understanding of the military budget or arms industry of the country for which they are to provide data.
  • Publications in relevant fields, including international security, military affairs, peace and conflict studies, defence and peace economics, etc.

If you are interested in becoming part of the SIPRI Military Expenditure and Arms Production Expert Network or want more information, please contact Dr. Aude Fleurant, Director of the SIPRI Arms and Military Expenditure Programme.

 

7. Calculations

The The SIPRI military expenditure figures are presented on a calendar-year basis. The only exception is the United States, for which statistics report data on a fiscal-year basis. Calendar-year data is 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 datathat it should be an indicator of resource use on an opportunity cost basis.

Average market exchange rates (MER) for the relevant year are used to convert local currency figures into US dollars, or in some cases official fixed exchange rates. For the constant dollar figures, this means the MER for the base year (currently 2014), while for the current dollar figures given for the most recent year's data, this means the MER for that year (currently 2014). Market exchange rates are determined by the supply and demand of currencies used in international transactions, and as such do not always accurately reflect differences in price levels between countries. Fixed official exchange rates may be even less reflective of the relative purchasing power of a currency.

An alternative is to use GDP-based purchasing power parity (PPP) exchange rates, which reflect the actual relative purchasing power of each currency in the domestic economy. However, the reliability of such PPP rates is lower than for MERs, since PPP rates are statistical estimates, calculated on the basis of collected price data for a basket of goods and services for benchmark years. Like all statistical estimates they are subject to a margin of error. A more detailed discussion of the relative merits of PPP and market exchange rates is given in the Monitoring military expenditure topical backgrounder.

The choice of base year (the year in whose prices the data is expressed) also has a significant impact on cross-country comparisons of expenditure data because different national currencies vary against the dollar in different ways. For the current edition of the SIPRI Military Expenditure Database, the base year has been updated to 2014. Between 2014 and 2015, the US dollar has gone up against the currencies of several important major spenders, including the Euro, the Russian rouble and the Japanese Yen, as well as most other currencies. This means that figures for most other countries' military expenditure expressed in current (2015) US dollars is significantly lower than when they are expressed in constant (2014) US dollars. As a result, the world total in current US dollars, of $1676 billion, is significantly lower than the figure in constant (2014) US dollars, of $1773 billion.

The ratio of military expenditure to GDP is calculated in domestic currency at current prices and for calendar years. The economic groupings used are based on figures for the 2014 Gross National Income (GNI) per capita as shown in the World Bank's World Development Indicators for 2015. For the purpose of calculating aggregate totals, estimates have been made for countries for which data is 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. However, in some cases where no data has been available for a large number of years, it is not considered viable to make meaningful estimates in this way, as the degree of uncertainty is too large. These countries are therefore excluded from the world, regional and group totals. These countries are Eritrea (no data since 2003), Sudan (2006), Turkmenistan (1999) and Uzbekistan (2003). Other countries are excluded from the totals due to the lack of economic data allowing conversion into constant dollars. These countries are Cuba, North Korea, Somalia and former Yugoslavia. Syria is also excluded from all totals as there is no economic data beyond 2011, so conversion into constant (2014) prices is impossible.

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

 

 

[1] Wang, S., 'The military expenditure of China, 1989-98', SIPRI Yearbook 1999.

[2] World Bank, World Development Report 2010: development and climate change (World Bank: Washington, DC, 2009), p377.