Military budget A military budget ( or military expenditure ) , also known as a defense budget , is the amount of financial resources dedicated by an entity ( most often a nation or a state ) , to raising and maintaining an armed forces . Military budgets often reflect how strongly an entity perceives the likelihood of threats against it , or the amount of aggression it wishes to employ . It also gives an idea of how much financing should be provided for the upcoming year . The size of a budget also reflects the entity ' s ability to fund military activities . Factors include the size of that entity ' s economy , other financial demands on that entity , and the willingness of that entity ' s government or people to fund such military activity . Generally excluded from military expenditures is spending on internal law enforcement and disabled veteran rehabilitation . According to the Stockholm International Peace Research Institute , in 2011 , world military expenditure for the world amounted to 1 . 735 trillion US $ . World ' s top 15 military budgets 2012 . The world ' s five largest military spenders ( the United States , China , Russia , the United Kingdom and France ) are recognized to be world powers with each being a veto - wielding permanent member of the United Nations Security Council , which was established after the end of World War II . However in 2012 , Japan spent slightly more on defence than France . Saudi Arabia is another notable military spender of recent times and now ranks 7th . This list is based on the Stockholm International Peace Research Institute ( SIPRI ) Yearbook 2012 which includes a list on the world ' s top 15 military spenders in 2011 , based on current market exchange rates . Historic expenditure . 1897 . In the " Saturday Review " magazine in February 1898 , indicates that the percentage of tax revenue spent on military budgets as follows : 2003 . In 2004 , the yearly report by the Stockholm International Peace Research Institute showed that the purchase of military products by NATO member nations during the year 2003 rose by 11 percent , compared to 2002 ( 6 . 5 percent in volume ) . In some countries , this budget had been increased to the level maintained during the Cold War . The military budget of the United States lead this increase . U . S . purchases accounted for 47 % of world military expenditure in 2003 . A total of about US $ 415 billion . Additional funding for the War in Iraq and the supplementary expense of US $ 83 billion accounted for much of the increase . Other spending accounted for only 3 . 5 percent of it . The military budgets of the United Kingdom , France and Italy represented about 15 % of world military spending . France and the United Kingdom increased their equipment expenses , so as not only to act in US military operations with the same technological level of their ally , but also to be able to act independently in smaller military campaigns . ( Such as was seen in the Libya ) . Among non - NATO nations , Japan spent US $ 46 . 9 billion in 2003 , The People ' s Republic of China , US $ 32 . 8 billion , and Russia , US $ 13 billion . As a percentage share of world military spending this represented 5 % , 4 % , and 1 % , respectively . Political science and economics . The effects of military expenditure on a nation ' s economy and society , and what determines military expenditure , are notable issues in political science and economics . There are controversial findings and theories regarding these topics . Global Day of Action on Military Spending ( GDAMS ) . Every year in April is the Global Day of Action on Military Spending ( GDAMS ) , which aims to gather people and create a global movement that persuades governments to reallocate their military spending to essential human needs such as food , education , health care , social services and environmental concerns .