Canada needs to increase defence spending by $75.3B to meet NATO requirements: PBO

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Canada needs to increase its defence spending by billions of dollars over the next five years, just to meet minimum benchmarks established by NATO.

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In a report released Thursday, Canada’s Parliamentary Budget Officer (PBO) Yves Giroux said Canada’s defence spending would need to increase by $75.3 billion over the next five years just to meet NATO’s minimum requirements for members — two per cent of GDP.

That target, Giroux told reporters, remains out of reach for Canada, despite marked increases in defence spending since 2014.

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In 2006, defence ministers of NATO member countries agreed to the two per cent benchmark, a move meant to both increase and maintain military readiness across the alliance, as well as serve as an indicator of each members’ political will.

This policy was reaffirmed by NATO’s 30 members earlier this year in Brussels.

In this year’s federal budget, Canada pledged to increase defence spending by $8 billion on top of funding already established in Strong, Secure, Engaged (SSE,) Canada’s national defence policy introduced in 2017.

Details on where that extra money would go remains unclear — government officials in April said a comprehensive defence policy review was also in the works.

That review is in addition to ongoing discussions surrounding Canada’s commitments to NORAD, as well as our assistance to Ukraine.

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When introduced, SSE promised $535 billion to Canada’s military over the subsequent two decades.

NATO’s definitions of defence spending also includes funding for transfers, pensions and support for former members, and support of paramilitary organizations like the Canadian Coast Guard, an agency of Fisheries and Oceans Canada.

This year, Canada is spending $36.3 billion in defence spending, representing 1.33 per cent of GDP

This year, Canada is spending $36.3 billion in defence spending, representing 1.33 per cent of GDP.

In his report, Giroux suggested Canada needed to increase this year’s defence spending by $18.2 billion just to meet the two per cent target, gradually decreasing from $15.5 in the 2023-24 fiscal year to $13 billion in 2026-27.

Funding forecasts — developed from numbers gleaned from SSE, Department of National Defence (DND) reports and other data — show Canada’s defence spending increasing to $41.5 billion next year, peaking at $51.1 billion in FY 2026-27.

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That, said the budget watchdog, only gets Canada to between 1.46 to just under 1.6 per cent over the next half-decade.

While only a third of NATO’s 30 members spend more than two per cent of GDP on defence spending, Canada ranks fifth from last, according to a 2021 NATO report — ahead of Slovenia (1.28 per cent,) Belgium (1.12 per cent,) Spain (1.02 per cent) and Luxembourg (0.57 per cent.)

When applied to NATO’s guidelines of setting equipment spending at 20 per cent of all defence expenditures, Canada’s 17.7 per cent only ranked ahead of Portugal’s 17.7 per cent, and Slovenia’s 15.7 per cent.

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