News

Defense spending would increase the deficit by $63 billion

Perlina Rossi-Brown

2026-02-11 09:31:43

Credit: Getty Images

The parliamentary body responsible for overseeing public spending estimates that Prime Minister Mark Carney’s plan to spend the equivalent of 5% of GDP on defense over the next decade will increase the federal deficit by C$63 billion by 2035 (1.4 percentage points of GDP). As early as fiscal year 2026-2027, the budget deficit related to this new spending could amount to some $3 billion (0.1 percentage point of GDP).

An additional $33.5 billion per year

According to a new report by Parliamentary Budget Officer Jason Jacques, released on February 5, the gradual increase in core military spending to reach this quota will cost the country an additional $33.5 billion per year. Jacques also criticizes the government for not releasing data to support its projections.

Approximately 5% of GDP dedicated to defense by 2035

In response to pressure from US President Donald Trump to increase NATO members’ military spending, the political-military alliance has set a target for each member to spend 5% of its GDP on defense by 2035. Prime Minister Carney announced in June 2025 his commitment to meet this target. This represents a significant increase for the country, which spent only 1.4% of its GDP on defense in 2024.

In fact, Canada has not devoted such a substantial share of its GDP to defense since the Cold War.

A two-pronged military objective

Ottawa’s new target is divided into two parts, in line with the plan presented by NATO Secretary General Mark Rutte. On the one hand, Mark Carney has indicated that Canada will devote 3.5% of its GDP to “basic” military capabilities, including the modernization of the Canadian Armed Forces’ military equipment and technologies.

On the other hand, an additional 1.5% of GDP will fund “broader” infrastructure projects, such as the construction of airports, ports, and telecommunications networks. The Carney government’s 2025 budget indicates that Canada is already on track to reach this 1.5% rate thanks to existing provincial and municipal plans. The PBO projects that the impact of these costs on the federal debt-to-GDP ratio is expected to increase from 0.1 percentage points of GDP in 2026-2027 to 6.3 points in 2035-2036.

A defense industrial strategy still awaited

The Carney government has promised to release a defense industrial strategy detailing its plans for the defense sector, but it has not met its self-imposed deadline of Christmas 2025. According to NATO estimates, Canada was supposed to meet the target of spending the equivalent of 2% of its GDP on defense in 2025, a target that Ottawa has never managed to meet over the years. The final assessment showing whether Canada has succeeded in meeting this target is not expected to be released for several months.