Canada's 5% NATO pledge may add $63-billion to deficit over next decade

Parliament's budget watchdog reports that raising defence and related infrastructure spending to five percent of GDP could add about $63-billion to Canada's federal deficit over the next decade; the government has not published a detailed year-by-year plan to reach the target.

Parliament's budget watchdog has released a report examining Canada's NATO spending pledge and its fiscal effects. The report notes Prime Minister Mark Carney pledged to raise core defence spending to 3.5 per cent of GDP within 10 years and to add 1.5 per cent for security- and defence-related infrastructure. The watchdog says meeting those commitments could increase the federal deficit by about $63-billion over the next decade. The government has not published a detailed year-by-year spending plan showing how it will reach the five-per-cent goal. Key facts: - The pledge was announced at the 2025 NATO leaders summit and calls for core defence spending of 3.5 per cent of GDP within 10 years, plus 1.5 per cent for dual civilian-military infrastructure. - Interim Parliamentary Budget Officer Jason Jacques reported that meeting the 3.5 per cent defence target could require about $33.5-billion in additional spending each year until 2035–36. - Current federal defence-related spending this fiscal year is about $63-billion, or roughly 2 per cent of GDP. - The Department of National Defence did not provide a year-by-year path when asked and referred to NATO-based estimates that 3.5 per cent of GDP in 2035 might translate to about $150-billion. Summary: The watchdog's figures point to a substantial fiscal impact tied to the NATO pledge and the additional infrastructure commitment. The government has said existing plans will cover the 1.5-per-cent infrastructure element but has not released a comprehensive path to reach the 3.5-per-cent defence target. Undetermined at this time.