Where did the money go?


  • Peter Nordlund

Publish date: 2018-11-21

Report number: FOI-R--4629--SE

Pages: 29

Written in: Swedish


  • Defense Price Index
  • Defense Specific Inflation
  • Cost Evolvement for Defense Equipment.


The Defence Price Index (FPI) is used to compensate the Swedish Armed Forces for inflation. In this report we focus on the changes in the FPI implemented from 2012 following a parliamentary decision, as proposed by the Ministry of Finance. The changes concerned the appropriations for defense equipment. The purpose of the study is to provide basis for discussions and decisions on revisions in the price compensation system for defence equipment. Another purpose is to demonstrate the economic impact on the appropriations of the changes. This can in turn, illustrate the importance of the construction of FPI and its compliance with actual price changes. The study shows that the changes in FPI have resulted in SEK 2.5 billion in lower annual defense budget in 2018. Since the introduction the accumulative amount has been SEK 8.7 billion in lower appropriations. This also means that the changes in FPI have counteracted a large proportion of the increase in funding received by the Armed Forces in the Defense Declaration of 2015 for the period 2016-20. There are strong arguments for reviewing the design of the FPI in general and FPI for defense equipment, in particular, to increase compliance with actual price changes.