A surge in defence spending around the world could increase budget deficits and public debt over the medium term, the International Monetary Fund warned on Thursday.
In a new report, the IMF said higher military spending often boosts economic activity in the short term by supporting consumption and investment. However, it is usually funded through borrowing, which adds to public debt over time, reported Bloomberg.
In a blog, IMF economists said, "More frequent conflicts and rising geopolitical tensions have led many countries to review their security priorities and increase defence spending. This raises difficult trade-offs for policymakers."
Countries Increase Spends On Military
Several European countries, including Germany and France, have increased military budgets in recent years amid the war in Ukraine and pressure from US President Donald Trump for Europe to take greater responsibility for its own defence.
In the United States, the Trump administration has also proposed a sharp rise in defence spending. This followed recent military actions abroad, including a strike in Venezuela aimed at capturing President Nicolas Maduro and a conflict with Iran.
The IMF analysed data from more than 160 countries dating back to 1946 and identified 215 episodes of rising defence spending. While many occurred in the 1970s and 1980s, large spending increases have become more common in recent years.
The fund found that a typical defence spending boom lasts over two-and-a-half years, with around two-thirds of the extra costs financed through borrowing. The impact is even greater during wartime, when public debt rises more sharply.
"In wartime booms, public debt increases by about 14 percentage points of GDP, while social spending falls in real terms," the IMF said, as reported by Bloomberg.
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Uncertainty In Middle East
The warning comes amid continued uncertainty in the Middle East. Although the US and Iran have agreed to a two-week ceasefire, IMF Managing Director Kristalina Georgieva said the fund is likely to cut its global growth forecasts because of the conflict. Global debt reached a record $348 trillion in 2025, according to the Institute of International Finance, as governments spent more on national security.
The IMF defines a defence spending boom as a period in which a country's military spending rises by at least one percentage point of GDP, based on a two-year average. It noted that such spending generally increases economic output roughly in line with the amount spent, rather than delivering a stronger boost to growth.
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