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2d ago

Canada Commits to 5% of GDP Defence Spending by 2035 as Deficits Surge

A new C.D. Howe Institute report warns Ottawa’s deficit will top $92 billion this year under the expanded defence plan.

Prime Minister Mark Carney holds a closing press conference with Minister of Foreign Affairs Anita Anand, left and Minister of National Defence David McGuinty following the NATO Summit in The Hague, Netherlands on Wednesday, June 25, 2025. THE CANADIAN PRESS/Sean Kilpatrick
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Overview

  • Prime Minister Mark Carney and 31 NATO allies pledged in The Hague to raise defence-related spending to 5 percent of GDP by 2035.
  • Ottawa has injected an additional $9.3 billion this fiscal year to meet the 2 percent-of-GDP goal ahead of schedule, lifting defence outlays above $62 billion.
  • The C.D. Howe Institute projects a cumulative $311 billion deficit over four years, averaging $77.7 billion annually, rising to $342.7 billion if promised savings fail to materialize.
  • The think tank expects the current-year deficit to exceed $92 billion as military spending increases and election platform cuts remain unverified.
  • Policymakers are weighing deeper program cuts, stronger tax-gap enforcement and purpose-driven bond issuances to fund the surge in military spending with experts cautioning that split capital and operating budget streams could undermine fiscal transparency.