The Military spending space functions as a maximum spending limit. It prevents unrealistic spending on weapons.
The spending space depends on the difference between income and cost and it increases if the country has a larger positive balance. It also depends on the population of the country and higher population numbers result in a larger spending space.
There are minimum levels that will be around 13B per game month for countries with a low population number. These minimum levels will increase with the population. The max spending space per game month is 200B. If the military spending space remains unused, it may accumulate up to 500B in all countries.
Although military spending can be increased, the danger of overspending increases too. Counties can get into large debts and bankrupt.
When weapons are ordered, the spending space declines by the value of that order. Contracts are treated as orders. If you sign many contracts for delivery of weapons, you may exceed your spending space. If overspending continues, contracts will be reduced automatically and finally cancelled.
Check the Military spending space and tune contracts to fit the budget.
The best way of course to increase the spending space is to grow the economy so more money is available for weapons. Short-term shortages can be fixed quickly by the use of a military spending space booster that will add a onetime 500 B to the military spending space.