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Nepal - Military Spending

Military expenditure (% of GDP) in Nepal was measured at 1.54% in 2014, according to the World Bank. The spread of the Maoist armed movement across the country, particularly in the rural regions in Nepal, caused the royal government to incrementally increase the defense expenditure in security institutions and recruiting security personnel to containing the Maoists. The security expenditure never had reached such a level in the history of Nepal.

Military expenditures data from SIPRI are derived from the NATO definition, which includes all current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities. Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid (in the military expenditures of the donor country).

Excluded are civil defense and current expenditures for previous military activities, such as for veterans' benefits, demobilization, conversion, and destruction of weapons. This definition cannot be applied for all countries, however, since that would require much more detailed information than is available about what is included in military budgets and off-budget military expenditure items. (For example, military budgets might or might not cover civil defense, reserves and auxiliary forces, police and paramilitary forces, dual-purpose forces such as military and civilian police, military grants in kind, pensions for military personnel, and social security contributions paid by one part of government to another.)

Nepal was one of the poorest nations in the world. With a per capita income ranging from US$158 to US$180 per year, about 40 percent of the population living in conditions of absolute poverty, and virtually no marketable national resources, the country's fiscal resources for maintaining a standing army were woefully inadequate. To compound matters, the country had virtually no capacity to provision its military beyond the most basic items such as food, clothing, and small-arms ammunition. Almost all of the army's equipment needs, such as air-defense guns and aircraft of all kinds, and its requirements for overhauling major equipment items were purchased abroad through scarce foreign exchange reserves or concessional terms. By any standard, the Royal Nepal Army faced severe resource constraints, even in comparison with other less-developed countries.

Nevertheless, resources earmarked for the military represented a modest defense burden. According to 1989 estimates, approximately US$33 million, or 1.2 percent of the gross national product (GNP), was budgeted for defense. The defense outlay represented approximately 6.2 percent of the central government expenditures budget. Health, education, and economic development clearly took priority over defense.

Defense budget figures must be used with caution, however. Most observers suspected that actual outlays for the military were buried in other budget categories or else handled discreetly under accounts controlled by the royal family. Much of the defense budget, however, paid for routine recurring costs, particularly salaries and pensions. The defense budget traditionally was not subjected to close public scrutiny, and all but the most generalized statistics were a closely guarded secret. By the 1990s, it was unclear whether this pattern would hold true. The Parliament, now genuinely representative, was constitutionally responsible for passing the annual budget and overseeing national defense requirements, but had not yet had a chance to prove itself in practice.