Political economy
The interaction between security spending priorities and economic growth in fragile and conflict-affected states.
In fragile and conflict-affected environments, governments juggle scarce resources between security needs and long-term development goals, shaping macroeconomic outcomes, investor confidence, and citizen well-being in ways that can either stabilize or destabilize fragile economies over time.
Published by
Thomas Moore
August 06, 2025 - 3 min Read
In many fragile settings, security expenditure dominates the budget as governments respond to immediate threats, insurgencies, and crime waves. This prioritization creates a fiscal environment where essential public goods—education, health, infrastructure—receive limited funding, potentially undermining long-run growth. Donor programs often channel aid toward security reform, demobilization, or military modernization, which can strengthen state capacity but may also widen budgetary deficits if not paired with revenue reforms. Growth effects hinge on how security investments translate into predictable conditions for private investment, institutional reform, and reliable service delivery. When security spending is efficient and well-targeted, it can foster confidence and pave the way for inclusive growth.
Conversely, excessive or misaligned security outlays can crowd out critical structural investments that underpin durable prosperity. In places where conflict persists, captains of industry and small enterprises struggle with insecurity, higher operating costs, and constrained credit access. Without a credible peace dividend, fiscal space shrinks, and macro stability erodes, making economic recovery slower and more fragile. Policymakers face a balancing act: deploy enough resources to deter violence while ensuring that critical drivers of growth—education, health, legal systems, and infrastructure—remain adequately funded. The challenge is translating security gains into productivity gains that endure even after guns fall silent.
Security financing shapes growth through policy coherence and governance quality.
The link between security investments and growth is often indirect but consequential. Investments in policing, border control, and counterterrorism can reduce disruption to commerce, protect supply chains, and improve market functioning. Yet if these efforts are overextended or opaque, they may erode trust in institutions and provoke rent-seeking behaviors among elites. Transparent budgeting, performance auditing, and civil society oversight help align security measures with economic objectives. When defense and development agencies coordinate, the state can deliver predictable security while still expanding social services and private sector opportunity. The result is a more stable environment where businesses can plan and communities can invest in the future.
Evidence from diverse fragile states suggests that the form and scope of security spending matter as much as the total level. Programs that integrate community security, rule-of-law training, and civilian protection tend to support steady growth by reducing violence without stifling growth initiatives. Conversely, security approaches that rely on heavy militarization without parallel reforms often create cycles of mistrust and dependency. Donor coordination matters too: aligned financing streams that reward peacebuilding and governance reforms encourage prudent spending. When budgets reflect shared goals, security investments become a platform for economic consolidation rather than a barrier to progress.
Administrative design and institutional trust drive growth alongside security.
In fragile economies, the way money is spent on defense, policing, and stability programs signals long-run governance quality to investors and citizens alike. Transparent procurement, anti-corruption measures, and clear performance indicators reduce misallocation and mispricing. When security spending is accompanied by reforms in revenue mobilization, public financial management, and judicial independence, fiscal space can expand for education and health. This synergy can create a virtuous circle: improved security lowers risk premiums, which boosts investment, which then funds growth-supporting services and job creation. The economic payoff extends beyond GDP, touching social mobility and access to opportunity for vulnerable populations.
However, if security funds are captured by patronage networks or diverted toward nonessential capabilities, the economy bears hidden costs. Distortions in spending priorities undermine trust in public institutions and feed a cycle of grievance and protest. In such contexts, the private sector may adopt risk-averse strategies, delaying capital expenditure and layoffs in critical industries. The key to unlocking growth lies in constraining discretionary behavior, enforcing civil service merit, and embedding security programs within a broader reform agenda. By linking security outcomes with measurable economic results, governments can preserve resources for growth while maintaining credible defense and public safety.
Growth-oriented outcomes depend on credible security governance.
Fiscal discipline and predictable budgeting play central roles in fragile states seeking sustainable growth. When security budgets follow multi-year plans with clear objectives and milestones, ministries can forecast revenue requirements and align them with development priorities. Routine auditing and public disclosure of security expenditures increase accountability, reducing the space for leaks and corruption. Community engagement in budgeting decisions also enhances legitimacy, ensuring that security measures reflect local needs without alienating citizens. The result is a more coherent policy environment where both security and development agencies operate under shared rules and mutual accountability.
Beyond internal controls, international partners contribute by harmonizing standards and aligning incentives. Coherent security aid—whether through training, equipment, or governance support—needs to reinforce domestic governance reforms rather than substitute them. When external actors insist on measurable progress in rule of law, anticorruption, and transparency, the overall effectiveness of security spending improves. Collaboration that combines security capacity with economic programs—such as rural development, job training, and microfinance—helps translate security gains into tangible growth outcomes for communities most affected by conflict.
Synthesis and future prospects for growth in fragile states.
Learning from conflict-affected economies highlights the importance of sequencing. Early security stabilization can pave the way for later economic reforms, but premature liberalization without security guarantees risks relapse. A phased approach, starting with essential security improvements and gradually expanding social investments, tends to produce more durable growth trajectories. If policymakers fail to protect essential services during transition, poverty and despair can erode social cohesion, undoing any security gains. Strategic sequencing also requires flexible budgeting that can adapt to evolving threats and opportunities without destabilizing macroeconomic foundations.
The opportunity costs of misjudging timing are high. Delays in reducing violence can deter private investment and push informal activity deeper underground, increasing informality and reducing tax revenue. Conversely, too brisk a withdrawal of security resources can leave communities vulnerable, triggering renewed conflict and eroding investor confidence. A resilient policy approach combines portioned security spending with parallel investments in human capital, infrastructure, and governance reform. That combination tends to produce a broader and more inclusive growth cycle, delivering benefits that endure beyond short-term security gains.
In the most successful fragile economies, security spending is leveraged to catalyze lasting development. This requires transparent budgeting, accountable institutions, and consistent rule of law. When citizens perceive that security investments protect livelihood and personal safety while development projects improve living standards, social trust strengthens and participation increases. The private sector responds to stable conditions with renewed entrepreneurship and investment, driving job creation and diversification. International support then becomes a complement to domestic reform, not a substitute. The overarching lesson is that security and growth are interdependent: each reinforces the other when guided by clear governance standards, measurable results, and inclusive policymaking.
Looking ahead, fragile and conflict-affected states can achieve better outcomes by embedding security decisions within a holistic growth strategy. Prioritizing proportional defense spending, strengthening anti-corruption frameworks, and expanding social protection creates a credible peace dividend. When security policy aligns with education, health, and infrastructure, the economy gains resilience against shocks and volatility. The ultimate objective is a stable environment where people can pursue opportunities without fear, and where public resources are allocated to sustain both security and prosperity for the long term. With disciplined implementation and sustained political will, growth becomes the foundation for durable peace.
