Canada still a long way from hitting NATO's defence spending target, budget watchdog says

In order to meet NATO's benchmark for member nation defence spending in the short term, Canada would have to commit an additional $75.3 billion before the end of 2027, the parliamentary budget officer said Thursday.

That additional cash would have to be in addition to the new money committed to the military by the Liberal government in last spring's budget — a funding boost that was meant to address growing global instability brought on by Russia's invasion of Ukraine.

NATO allies have long measured their defence spending as a percentage of the size of their national economies. NATO urges member countries to commit two per cent of their gross domestic product (GDP) to maintaining and operating their armed forces.

Canada spends nowhere near that amount. It spent approximately 1.4 per cent of GDP on the military in 2021.

The Liberal government's budget, which is coming up for final approval in the House of Commons, would inject an additional $8 billion into defence appropriations over the next five years. That barely moves the needle toward NATO's two per cent target; it would bring Canada's defence spending up to 1.59 per cent of GDP.

'It's a matter of policy choices'

Parliamentary Budget Officer Yves Giroux said Thursday that the federal government could meet the alliance's goal if it chose to do so.

"If the government wanted to reach that target, it could decide to allocate additional money towards reaching the target," Giroux told reporters following the release of his office's assessment. "Whether it could do it this year, [it's] very unlikely given capacity constraints, but over the medium term, if they wanted to. It's a matter of policy choices."

The invasion of Ukraine and heightened international tension with Russia have turned the spotlight on defence spending. Many of Canada's NATO partners have pledged to meet the two per cent goal, established in 2006 and then reinforced in 2014 following Moscow's annexation of Crimea.

The sense of urgency among allies is best demonstrated by Germany, which — like Canada — has failed to meet that target. In the spring, Chancellor Olaf Scholz reversed decades of German foreign policy by agreeing to ship weapons to Ukraine and pledging to meet the two per cent defence spending goal.

The Liberal government in Canada has faced sustained criticism — from the Opposition Conservatives and some allies, notably the United States under former president Donald Trump — for not having a plan to meet the NATO target.

Allied leaders can expect renewed pressure to hit the target when they meet in Madrid, Spain later this month to discuss the war in Ukraine and plans to modernize the military alliance past 2030.

Giroux said NATO's definition of defence spending is broad and encompasses more than just direct military spending.

In Canada, for example, both the Canadian Coast Guard and veterans pensions are included in the country's calculation of military spending.

While the federal government's plans for defence spending have been laid out in detail, the plan for renewing the coast guard fleet — which will require the addition of up to 18 ships — is less clear.

Giroux said that, depending on how coast guard spending rolls out, there could be an impact on Canada's total military spending.

Some of the coast guard plans "could well be beyond the five year horizon" of the report presented on Thursday.

"But yeah, you're right," he added. "Coast guard spending could help Canada meet the two per cent target."