Prime Minister Mark Carney has formally committed Canada to lifting defence outlays to 2% of GDP before 31 March, injecting $9 billion in new cash for fiscal 2025-26 and pushing annual military spending to roughly $50 billion—up from $34.6 billion, or 1.4% of GDP, in the current year. This also aligns as fulfilling a long-standing NATO commitment.
Calling the moment “an increasingly dangerous and divided world,” Carney said the objective is to “protect Canadians, not satisfy NATO accountants,” even as the alliance prepares to debate a future 5% threshold at next month’s summit in The Hague.
Carney’s plan layers immediate readiness money onto a broader remake of Canada’s force structure. About $2.6 billion is earmarked for pay raises, healthcare staff and an accelerated drive to add 13,000 Regular and Reserve troops by 2030.
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A further $844 million will shore up fleet maintenance and refurbish bases, while $560 million will modernise cyberdefences and data networks across National Defence and the Communications Security Establishment.
Procurement accelerates as well: $1 billion targets Arctic-ready drones, seafloor sensors, counter-UAV kits, long-range precision missiles and expanded domestic ammunition lines. To ensure those projects materialise, Ottawa is launching a $2.1 billion Defence Industrial Strategy aimed at shrinking red tape and scaling Canadian suppliers, and allocating $2 billion to deepen equipment partnerships beyond the US.
In a structural shift, the $2.5 billion-a-year Canadian Coast Guard will be folded into the Department of National Defence, expanding maritime surveillance under a single command.
Key capability priorities—Arctic Over-the-Horizon Radar, Joint Support Ships and increased armoured-vehicle fleets among them—mirror the security gaps highlighted in last year’s Our North, Strong and Free policy. Yet analysts caution that 60–70% of the enlarged budget remains tied to personnel and sustainment, leaving limited head-room for new hardware, while domestic factories will need years, not months, to qualify and ramp production.
Canada first endorsed NATO’s 2014 guideline that allies spend at least 2% of GDP on defence, but Ottawa consistently lagged until Carney pledged to close the gap this fiscal year, saying the target will be achieved “half a decade ahead of schedule.”
Former NATO head George Robertson confirms Industry Minister Mélanie Joly’s assurance that Canada “would reach the alliance goal…by the end of the year,” underscoring cross-government consensus on closing the spending gap.
Although NATO says 23 of its 32 members now clear the 2% bar, eight still lag behind: joining Canada below the line are Croatia (1.81%), Portugal (1.55%), Italy (1.49%), Belgium (1.30%), Luxembourg (1.29%), Slovenia (1.29%), and Spain (1.28%).
This is the current standing as the alliance is said to be ruminating a proposal to lift the yard-stick to 5% of GDP, with Secretary-General Mark Rutte saying that the higher bar is meant to future-proof allied deterrence.
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