Grounds for rational versions of budget finance of defense

This article examines the suitable options for financing the defense budget, the budget classification methodology, and an optimal financial allocation methodology from a systems perspective. In the current era of increasing globalization, new conditions in international relations, and increasing regional security risks, the need for rational planning of defense policy and expenditure structures is increasing.

In this research, the importance of four main principles of top priority, developing versions, ensuring balance, and goal program planning is determined. An algorithm to classify defense budgets using a systematic methodology is developed and compared to international experience, and possible solutions to adopt in Mongolia are presented. The quantitative analysis on the economic influence of military spending using “Multivariate Linear Regression”, “Arch”, and “Var” models based on statistical data from 1997-2024 revealed that the correlation between military spending and economic growth is weak. However, it is concluded that increasing defense spending is strategically important for strengthening security capabilities and stability in the long term. copy

This research concluded that the minimum level of defense spending as a share of GDP in the medium term should be 0.73%-1.25%, the maximum level should be 0.85%-1.53%, and in the long term, it is necessary to increase it to 2% at the policy level. Therefore, the article highlights the effectiveness of the adoption of a goal-based and program-based financing system in military budget planning, allocating resources rationally, and increasing financial transparency.

Budget, finance, budget classification, goal program, economic security