Ottawa faces an estimated sixty-three billion dollar increase to the federal deficit by the middle of the next decade if the country meets NATO's new five per cent defence spending benchmark.
In Budget 2025, Prime Minister Mark Carney's government stated that accelerating investments would put our country on a pathway to meet the NATO target of five per cent of gross domestic product by 2035—split between three and a half per cent for core defence and one and a half per cent for ancillary security spending. Yet the Department of National Defence declined to provide the Parliamentary Budget Office with a detailed year-by-year spending profile when asked last July.
To fill the government's planning gap, the budget watchdog constructed a baseline scenario where core defence spending rises gradually from two per cent this year to three and a half per cent by 2035. Under that modelling, reaching the benchmark requires one hundred fifty-nine billion dollars in core defence spending in the final year—an increase of sixty-eight billion dollars over a flat reference scenario—averaging an extra thirty-three billion five hundred million dollars in annual cash expenditures over the next ten years. Interim Parliamentary Budget Officer Jason Jacques noted that "this analysis highlights the scale of the investment required to meet Canada's NATO commitment and the associated fiscal implications."
Those cash injections carry a heavy ledger cost beyond the procurement yards. The budget watchdog estimates the ramp-up will inflate the federal deficit by sixty-three billion dollars—about one and four-tenths percentage points of gross domestic product—in the 2035-36 fiscal year while pushing the federal debt-to-GDP ratio up by six and three-tenths percentage points.
Ottawa has promised the alliance a military that meets the new standard, but our books still lack the year-by-year path to pay for it.
