Despite an increase in Sweden's defence allocations, rising costs have almost eliminated the effect of this additional spending if calculations are made using the nation's defence price index, national broadcaster SVT reported.
According to the new estimates from the Swedish Defence Research Agency (FOI), the defence allocations have thus effectively decreased by SEK 8.7 billion (almost $1 billion) since 2012. Furthermore, the losses have tended to snowball and become more significant each year.
The defence price index (FPI) is the basis for estimating costs when making annual allocations to the Swedish Armed Forces; it was introduced to compensate for price fluctuations for gear and equipment. Since the calculation method has been criticised in the past, following a 2012 decision by the Swedish parliament, the FPI has been re-calculated each year.
However, the new calculation method has revealed even greater effective losses for the Swedish Armed Forces.
"It got significantly worse. In particular, we at the Defence Research Agency have warned from early on that there would be a deterioration that would leave the Armed Forces under-financed," FOI senior engineer Peter Nordlund, who carried out the analysis, told SVT.
The dramatic decrease in effective defence funding is almost tantamount to Sweden's expenditure on new air defence from the US. The procurement of US-made Patriot air defence systems has been described as one of Sweden's most important military deals in modern times. The initial order has been estimated to be worth at least SEK 10 billion (over $1.1 billion).
"It's important money this is all about," Nordlund said, assuring that FOI's calculations are right. "It's pretty safe. It's a question of decimals. It's pure mathematics, essentially."
According to the FOI, the 2018 defence budget will thus be SEK 2.5 billion ($280 million) lower than previously envisaged. Therefore, the model has to be revised once more to compensate the Armed Forces for the price fluctuations, the FOI argued.
"There is little knowledge about this among politicians. In many cases, however, it has as great importance as the conscious decisions they make about budget hikes or reductions," Peter Nordlund said.
Following the Cold War-era, when the Swedish Armed Forces numbered a solid 180,000 soldiers and enjoyed a defence budget of 3.1 percent of the nation's GDP, Sweden's defence expenditure dropped to 1.1 percent in 2015, with fewer than 20,000 active soldiers. Since then, however, defence allocations have started to slowly crawl upward, with army bosses and defence officials often citing the "Russian threat" as a pretext.
Earlier this year, a defence report argued for the military budget to be doubled by 2035. The military also hopes to command as many as 120,000 troops.