NATO defence target could increase Canada's federal deficit, PBO says

Canada's Parliamentary Budget Office estimates meeting NATO's 3.5% direct military spending benchmark could require about $33.5 billion more in annual defence funding through 2035 and raise the federal deficit to roughly $63 billion in 2035–36; the PBO also reported the government has not published a year-by-year spending path.

A Parliamentary Budget Office analysis finds that meeting NATO's new defence spending benchmarks would add substantially to federal fiscal pressures. The PBO estimates roughly $33.5 billion in additional annual defence spending will be needed between now and 2035 to reach a 3.5 per cent direct military spending share. It further projects the federal deficit could rise to about $63 billion (1.4 percentage points of GDP) in 2035–36 if that spending path is followed. Key points: - The NATO pledge is framed as five per cent of GDP in total, split as 3.5 per cent for direct military spending and 1.5 per cent for defence infrastructure. - The PBO calculated about $33.5 billion more in annual defence spending through 2035 to meet the 3.5 per cent military benchmark. - The analysis estimates the federal deficit would increase to roughly $63 billion in 2035–36 and that debt-to-GDP would rise. - The Department of National Defence did not provide a year-by-year spending path and the government has not published detailed projections, according to the PBO. Summary: The PBO analysis indicates higher defence commitments would add to Canada’s projected deficits and debt measures if the NATO benchmarks are met. The government has not released the detailed year-by-year spending projections the PBO requested. Undetermined at this time.