The International Monetary Fund’s April 2026 World Economic Outlook arrives with an unusually candid subtitle – Global Economy in the Shadow of War – in the same month that NATO has locked in its most ambitious military spending target in history.
The opening analytical chapter notes explicitly that NATO members committed in June 2025 to raise annual defence and security-related spending to 5% of GDP by 2035, “more than double the previous 2 percent guideline”.
Two substantial chapters of empirical research follow. They document, carefully and at length, what that kind of spending surge does to economies. Then, with equal care, they decline to say whether it is wise.
Military spending
Chapter 2 of the IMF report draws on data from 164 countries since 1946 to study what happens when governments rapidly scale up military spending. A typical defence spending boom, it finds, raises outlays by about 2.7 percentage points of GDP over two and a half years.
This is, as the IMF notes, “broadly similar” to what NATO members now need to do to reach their 5% target.
Roughly two-thirds of such buildups are financed by borrowing. Public debt rises about 7 percentage points within three years. When the buildup is paid for by cutting other government programmes rather than borrowing, what the…
