Sales by the world's 100 biggest arms producers increased 1.9 per cent from the previous year to reach $374.8 billion, CNN quoted SIPRI as saying in an official report on Sunday night.
"The growth in arms sales was expected and was driven by the implementation of new national major weapon programmes, ongoing military operations in several countries and persistent regional tensions that are leading to an increased demand for weapons," the report said.
Arms producers in South Korea, which increasingly supply the country's military, saw the largest percentage increase among developed countries.
The spending splurge reflects fears of a potential conflict with North Korea. Sales by South Korean firms increased by over 20 per cent in 2016, to $8.4 billion.
While consumer purchases are included in the sales figures, national governments are by far the largest purchasers of arms and weapons systems, according to the report.
American firms remained at the top of the industry in 2016, with sales increasing by 4 per cent to more than $217 billion which was 58 per cent of the global total.
American defence firm Lockheed Martin, the world's largest producer, saw sales surge 11 per cent in 2016, thanks to increased deliveries of its F-35 fighter and its acquisition of helicopter producer Sikorsky.
Sales by Russian firms increased 3.8 per cent to $26.6 billion, a slower expansion than in recent years, CNN quoted the report as saying.
Moscow has boosted spending in order to overhaul its military capabilities, but procurement has slowed recently because of the country's strained finances.
"It's a money issue... They have been hit very severely by the drop in oil and gas prices," said Mr Fleurant.
She pointed to regional disputes, such as the standoff over islands in the South China Sea, as a major source of increased arms sales.
The area is home to crucial shipping lanes, and it's rich in oil and gas reserves. China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei have all made territorial claims to islands in the area.
"Countries like Vietnam order submarines and maritime patrol aircraft, because of what they consider China's assertiveness in these territorial disputes," Mr Fleurant added.
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.