Military spending grew six per cent last year alone, according to SIPRI's annual report.
In 2007, $1.339 trillion dollars (€851 billion; Dh4.93 trillion) was spent on arms and other military expenditures, corresponding to 2.5 percent of global gross domestic product, or GDP, and 202 dollars for each of the world's 6.6 billion people.
The United States spends by far the most towards military aims, dishing out $547 billion (Dh2.01 trillion) last year, or 45 per cent of global expenditure.
Britain, China, France and Japan, the next in line of big spenders, lag far behind, accounting for just 4 to 5 per cent of world military costs each.
"The factors driving increases in world military spending include countries' foreign policy objectives, real or perceived threats, armed conflict and policies to contribute to multilateral peacekeeping operations, combined with the availability of economic resources," the Sipri report said.
Registering the greatest regional growth was Eastern Europe, which saw its military spending skyrocket 162 per cent between 1998 and 2007 and 15 per cent from 2006 to 2007.
Russia, whose expenditures ballooned 13 per cent last year, was responsible for 86 per cent of the growth in the region, according to Sipri.
North America meanwhile saw its military spending swell 65 per cent, largely pulled by the United States, which has seen its costs grow 59 per cent since the September 11, 2001 attacks in New York and Washington.
"By 2007, US spending was higher than at any time since World War II," the Sipri report said.
In the past decade, the Middle East has boosted military expenditures by 62 per cent, South Asia by 57 per cent and Africa and East Asia by 51 per cent each.
Western Europe was the region with the least military spending growth at just 6 per cent, followed by Central America at 14 per cent.
At a national level, "China has increased its military spending threefold in real terms during the past decade," Sipri said, adding however that "due to its rapid economic growth, the economic burden of military spending is still moderate, at 2.1 per cent of GDP."
As a direct result of the increased military outlay, sales by the world's 100 leading arms producing companies (excluding in China) jumped nearly nine percent in 2006 compared to the year before to $315 billion (Dh1.16 trillion), Sipri said.
Sixty-three of the 100 top weapons firms are based in the United States and Western Europe, accounting alone for $292.3 billion (Dh1.1 trillion) in sales in 2006, the last year for which Sipri has numbers.