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Meeting NATO’s 5% target would require $159 billion in core defence spending by 2035, says PBO
Ottawa (Ontario), February 6, 2026
The Parliamentary Budget Officer (PBO) today released an analysis of the fiscal implications of meeting the North Atlantic Treaty Organization’s (NATO) defence spending commitment of 5% of gross domestic product (GDP) by 2035.
In Budget 2025, the Government stated that accelerating investments will put Canada on a pathway to meet the NATO 5% commitment by 2035. However, it has not provided detailed projections showing how the target will be achieved.
The NATO commitment includes a target of 3.5% of GDP for core defence spending and up to 1.5% of GDP for ancillary defence and security-related spending. The Government has indicated that the ancillary component is expected to be met through existing spending plans; this analysis therefore focuses on the additional core defence spending required to reach the target by 2035.
In the absence of detailed government projections, the PBO constructed a scenario in which core defence spending rises gradually from 2.0% of GDP in 2025 to 3.5% by 2035.
Under this scenario, meeting the NATO commitment would require $159 billion in core defence spending in 2035–36 on a cash basis, an increase of $68.2 billion relative to a reference scenario in which spending remains at 2% of GDP. Over the next decade, this represents an increase of approximately $33.5 billion per year in additional cash expenditures.
Relative to the reference scenario, the PBO estimates that these increases would raise the budgetary deficit by $63.0 billion (1.4 percentage points of GDP) in 2035–36 and increase the federal debt-to-GDP ratio by 6.3 percentage points.
“This analysis highlights the scale of the investment required to meet Canada’s NATO commitment and the associated fiscal implications,” said Jason Jacques, Interim Parliamentary Budget Officer.
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Le gouvernement n\u2019a cependant pas publi\u00e9 les d\u00e9tails de ses projections."}},{"content":{"en":"PBO estimates that meeting the NATO 5 per cent commitment by gradually increasing core defence spending from 2.0 per cent in 2025 to 3.5 per cent of gross domestic product (GDP) by 2035 will require additional defence spending averaging approximately $33.5 billion per year in cash expenditures over the next 10 years.","fr":"Le DPB estime que pour atteindre la cible de 5 % fix\u00e9e par l\u2019OTAN en augmentant progressivement les d\u00e9penses de d\u00e9fense de base de 2,0 % en 2025 \u00e0 3,5 % du PIB d\u2019ici 2035, il faudra consacrer en moyenne pr\u00e8s de 33,5 milliards de dollars par ann\u00e9e en d\u00e9penses au cours des dix prochaines ann\u00e9es."}},{"content":{"en":"PBO estimates that the additional core defence spending required to meet the NATO 5 per cent commitment will increase the budgetary deficit by $63.0 billion (1.4 percentage points of GDP) in 2035-36 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author={Michalyshyn, Katarina},\n title={Fiscal Implications of Meeting NATO\u2019s 5% Commitment},\n institution={The Office of the Parliamentary Budget Officer},\n year=2026,\n \n address = \u0022Ottawa, ON\u0022\n}","fr":"@techreport{DPB-RP2526022S,\n author={Michalyshyn, Katarina},\n title={R\\\u0027{e}percussions financi\\`{e}res de l\u2019atteinte de la cible de 5 % de l\u2019OTAN},\n institution={Bureau du directeur parlementaire du budget},\n year=2026,\n \n address = \u0022Ottawa, ON\u0022\n}"}}
