Canadian soldiers patrol the area around a NORAD satellite relay dome in Yukon.Gavin John/The Globe and Mail
A steep new military spending commitment for Canada will add nearly $63-billion to Ottawa’s budgetary deficit by the fiscal year 2035-36, Parliament’s budget watchdog says.
Accumulating debt as a result of deeper deficits could force difficult decisions for Canadians, interim Parliamentary Budget Officer Jason Jacques cautioned.
The government has so far not unveiled a new defence strategy or a plan on how it will spend this military funding.
“At some point, the government will need to make hard choices. Canadians will need to make hard choices, and Parliament will need to make hard choices around where the money comes from, because as Canadians know, you can’t perpetually increase your debt level faster than your ability to pay for it,” Mr. Jacques said in an interview.
A fighting chance: How Canada can beef up its defences and grow its economy at the same time
At the 2025 NATO leaders’ summit, Prime Minister Mark Carney pledged that Canada would boost core defence spending to 3.5 per cent of GDP within 10 years.
A report by the interim PBO released Thursday says meeting this new target for defence expenditures will cost billions in additional spending each year until 2035-36, when overall military spending would reach nearly $160-billion annually.
By comparison, the federal budget for defence-related spending this fiscal year in Canada ending March 31 is more than $62-billion or 2 per cent of annual economic output.
Asked for comment on the PBO report, Alice Hansen, director of communications for Defence Minister David McGuinty, said the government is confident in its spending targets.
“We will continue to work quickly to implement our generational investment in Canadian defence,” she said in a statement.
As part of the new NATO commitment, Mr. Carney also pledged further spending equal to 1.5 per cent GDP on security- and defence-related infrastructure that would have a dual civilian and military purpose, such as bridges, ports and roads, as well as cybersecurity and measures to protect energy pipelines. Ottawa says existing spending plans will cover this second commitment, which brings total defence-related spending to 5 per cent of GDP.
The Canadian government has not published a detailed spending plan showing how it intends to hit the 3.5‑per‑cent GDP mark.
When the Parliamentary Budget Office asked the Department of National Defence last July for a year‑by‑year path to 2035, it did not provide one. Instead, it pointed to NATO‑based estimates that 3.5 per cent of GDP in 2035 might translate into roughly $150-billion in annual spending, subject to change.
Budget analysts and former government officials have said that Canada should consider hiking consumption taxes to pay for defence spending increases, but Ottawa has not indicated any plans to do so.
Mr. Jacques said the way to pay for defence spending is a decision for Parliament. “How much debt are we willing to take on to pay for it and how much are we willing to kick down the road for somebody else to pay the debt interest costs?” he said, referring to future generations.
Don Drummond, a former chief economist at TD Bank who once served in the upper echelons of the Department of Finance, said he considers it “scandalous” that Ottawa has not laid out a plan for defence spending.
He said the government should have laid out a source of funding for this run-up in military expenditures.
Mr. Drummond said he suspects that the Canadian government and European allies – facing high debt burdens – will scale back spending plans after early 2029 when U.S. President Donald Trump is expected to leave office. Mr. Trump was a key factor in pushing countries to spend more on defence.