Federal government would have to double military spending to meet NATO target

The parliamentary budget officer (PBO) reports that the federal government must nearly double its defence budget to $81.9 billion to meet NATO’s military spending target by 2032, as promised.

In a report released Wednesday, the PBO analyzed the fiscal impact of meeting NATO’s requirement that member countries allocate two percent of their GDP to defence. Although all 32 NATO allies have committed to this target, Canada remains one of the few without a concrete plan to achieve it. Currently, 23 members either meet the goal or are on track to do so by the end of this year.

At a NATO summit in Washington, D.C., in June, Prime Minister Justin Trudeau pledged that Canada would meet the spending target by 2032. Trudeau faced mounting pressure from allies, particularly from U.S. politicians, to outline a spending strategy. This summit came a year after NATO leaders agreed to make two percent the minimum spending benchmark.

Former U.S. President and current Republican presidential nominee Donald Trump has previously warned that, if re-elected, the U.S. might withhold protection from NATO members who fail to meet their defence commitments. Mutual defence is a fundamental principle of the alliance.

Despite Trudeau’s commitment, he has not provided specific details on where and how defence spending will increase. The PBO noted that the government has not yet released figures outlining how it plans to reach the target.

Canada’s latest defence policy, introduced in April, projected that defence spending would rise to 1.76 percent of GDP by 2030. However, the PBO found this forecast to be flawed, as it assumed four years of economic recession.

“Using PBO GDP estimates, which align with those from the Department of Finance and other independent sources, the revised forecast projects defence spending to reach only 1.58 percent of GDP by 2029-30,” the report said, compared to 1.35 percent in 2024-25.

The PBO report also stated that Canada is expected to allocate $41 billion to defence in the current fiscal year.