The Swedish government will propose a 6.2 billion crown ($720 million) boost to defence spending over the next five years, its Defence Minister said on Thursday, citing increased instability in the region.
Peter Hultqvist said a worsening security situation, particularly Russian activity in and around the Baltic Sea, is forcing Sweden's armed forces to concentrate on the defence of its borders instead of international operations.
"We are making it very clear that we are shifting towards a focus of the national operations," he told a news conference.
The additional funds will be spent mainly on submarine operations and a permanent armed force on Gotland, a strategically important island in the Baltic, Hultqvist said.
In October last year, more than 200 troops, stealth ships and helicopters scoured Baltic waters off the capital Stockholm after reports of foreign "underwater activity", but did not find or bring to the surface any submarine.
Governments in the region are increasingly worried about Russian assertiveness as a result of Moscow's role in the Ukraine crisis.
Sweden has already said it will purchase up to 70 new fighter jets and new submarines as it looks to reverse decades of underspending on its armed forces.
The Nordic country has also drawn closer to NATO in the past few years although the current government has ruled out seeking membership of the US-led alliance.
Sweden's own military has questioned its ability to defend itself for more than a week against a Russian attack after incidents where NATO warplanes were scrambled to meet Russian bombers rehearsing a bomb run on Sweden.