Key Takeaways
- Canada is increasing its defence spending to meet NATO commitments and boost the domestic economy, with a goal of reaching 5% of GDP by 2035.
- The federal government has committed to spending nearly $82 billion on defence over the coming years, with $9 billion booked for this year alone.
- However, it remains to be seen whether National Defence can actually push money out the door quickly enough to convince Canada’s allies it’s getting serious about its military.
- The department has historically struggled to spend its full budget, and many details on where all the money is going remain obscure to outside observers.
- The 2025 budget provides an incomplete picture, missing key items such as the planned fleet of new submarines and a full fiscal plan through to 2035.
Introduction to Canada’s Defence Spending
Canada is injecting tens of billions of dollars into defence as it looks to ramp up spending to levels not seen since the Cold War. This move is aimed at meeting NATO commitments and juicing the domestic economy. Defence Minister David McGuinty has expressed confidence that the federal government will hit its marks, stating that Ottawa is "moving quickly" on the accounting. He pointed to a number of large expenditures already in play, such as $2 billion for the military pay increase this year, renewed aid for Ukraine worth $900 million, and a string of new procurements and infrastructure upgrades.
Canada’s NATO Commitments
Just one year and one prime minister later, the message from Ottawa is now very different. Prime Minister Mark Carney announced in June that his government would meet the target of spending 2% of GDP on national defence this year, and later committed Canada to reaching 5% by 2035. The risks involved in not meeting the target are clear, with U.S. President Donald Trump having repeatedly warned NATO nations not to expect the U.S. to come to their aid if they don’t pay their share on defence. Carney’s first federal budget laid out nearly $82 billion in defence spending over the coming years, with $9 billion booked for this year alone.
Challenges in Meeting Defence Spending Targets
However, many details on where all the money is going remain obscure to outside observers. NATO projections suggest Canada is on track to spend some $63 billion on defence this fiscal year. David Perry, president of the Canadian Global Affairs Institute think tank, said Canadians won’t know for months if all of the earmarked money actually gets Canada to the 2% mark. "I wouldn’t bet my own money that every dollar of it gets spent, but I do think we will pass the bar that we need to politically within the alliance (showing that) at least we’ve tried," he said. Anessa Kimball, director of the Center for International Security at Laval University, said the 2025 budget provides an "incomplete picture," missing key items such as the planned fleet of expensive new submarines and a full fiscal plan through to 2035.
Implications of Defence Spending on the Domestic Economy
The 2025 budget claims the 1.5% target will be easily met through anticipated provincial and municipal spending, meaning Ottawa only really needs to worry about the remaining 3.5%. However, many questions remain about what qualifies as "defence-adjacent" spending, such as whether the planned Alto high-speed rail project could qualify. The opaque nature of NATO’s definitions permit "creative accounting" to help member states reach the difficult 5% figure. Kerry Buck, Canada’s former ambassador to NATO, said that the carve-out for "defence-adjacent" spending makes sense because the alliance still needs to spend money on infrastructure to support its militaries.
Maintaining Momentum in Defence Spending
The problem of maintaining momentum with even steeper commitments barrelling down on the government remains a significant challenge. "It’s going to be a big stretch for us just to get to 2%, and we’ll see whether or not we get here in one year. Moving to 3.5% is a considerable lift beyond that," Perry said. Kimball notes that Carney will still have to convince both Parliament and voters that the high spending is needed, since all of the funding for future years still needs to be approved. The U.S. Ambassador to Canada, Pete Hoekstra, told The Canadian Press that the U.S. takes Carney "at his word" when he says Canada will reach the 5% target, and that the "indications" are that Ottawa is getting serious on increasing military funding.
Conclusion
In conclusion, Canada’s increased defence spending is a significant move aimed at meeting NATO commitments and boosting the domestic economy. However, the challenges in meeting these targets, including the department’s historical struggle to spend its full budget and the opaque nature of NATO’s definitions, remain significant. The government will need to maintain momentum and convince both Parliament and voters that the high spending is needed to achieve its goals. As the situation continues to evolve, it will be important to monitor the progress of Canada’s defence spending and its implications for the country’s military and economy.