Canada's Defence Spending to Increase Amid NATO's Aggressive Military Budget Target

Strategic Insights -

Prime Minister Mark Carney said that a new and more aggressive target for the North Atlantic Treaty Organization (NATO) to increase its military budget may force the federal government to cut back in other areas, with "trade-offs" expected closer to 2030. The new target, agreed upon at the NATO leaders' summit in The Hague, aims to have member countries spend five per cent of their gross domestic product (GDP) on defence by 2035. This would be a significant increase from the current target of two per cent of GDP.

Key Takeaways:

  • The new NATO defence-spending target is broken into two parts: 1.5 per cent of GDP for defence- and security-related spending and 3.5 per cent on core defence requirements like troops and equipment.
  • Canada is likely already close to spending 1.5 per cent of GDP on defence and security-related spending, which includes federal money for ports, roads, telecommunications systems, and investments in critical minerals.
  • Hitting 3.5 per cent on direct defence spending would force the government to grapple with how to pay for it, with estimated annual spending of $150 billion by 2025-26, which is roughly one third of all federal spending.
  • Achieving the new target would require the annual defence budget to grow by upwards of $40 billion over the next decade, depending on GDP changes.
  • The government announced a $9-billion boost to defence spending in 2025-26, bringing the total budget to $62.7 billion, but achieving the new target would require further significant increases.
  • Experts warn that the government may have to shift spending away from other areas and possibly seek ways to increase revenues to avoid bigger deficits and government debt.
  • Canada's top soldier, Gen. Jennie Carignan, stated that Canada is vulnerable due to changing threats and needs to bolster its military, especially in the Arctic.

Statistics:

  • The new NATO defence-spending target is five per cent of GDP by 2035.
  • Canada's defence spending is expected to increase by $40 billion over the next decade.
  • The estimated annual defence budget by 2025-26 is $150 billion, which is roughly one third of all federal spending.
  • The total defence budget for 2025-26 is $62.7 billion, with a $9-billion boost.
  • The total workforce for the Canadian Armed Forces is expected to be bolstered, but specific numbers are not mentioned.

Sources:

  • Alex Ballingall, "Canada's Defence Spending to Increase Amid NATO's Aggressive Military Budget Target", Toronto Star.
  • Kevin Page, "Canada's Defence Spending May Force Government to Cut Back in Other Areas", Institute for Fiscal Studies and Democracy at the University of Ottawa.
  • Yves Giroux, "Government Asked to Provide Further Details on Defence Spending Commitments", Parliamentary Budget Officer.
  • Gen. Jennie Carignan, "Canada's Top Soldier Warns of Vulnerability Due to Changing Threats", The Star.