NATO 5% pledge to hike deficit by $63B by 2035, budget watchdog says

Interim Parliamentary Budget Officer Jason Jacques speaks with a senator as he waits to appear before the Senate Banking, Commerce and the Economy committee in Ottawa, Thursday, Oct. 2, 2025. THE CANADIAN PRESS/Adrian Wyld

OTTAWA — The parliamentary spending watchdog says Prime Minister Mark Carney’s plan to spend the equivalent of five per cent of GDP on defence by 2035 will push the federal budget deficit up by $63 billion in 2035.

A report by Parliamentary Budget Officer Jason Jacques estimates that gradually ramping up core defence spending to meet the new target will cost the country roughly an extra $33.5 billion a year.

NATO members committed to the steep new five per cent target last year in response to pressure from U.S. President Donald Trump to hike military spending across the alliance.

The Carney government’s first federal budget, released in the fall, vowed to “put Canada on a pathway” to meeting the latest NATO spending target.

But Jacques’ report criticizes the government for not publishing any supporting data for its projections.

The PBO’s estimates suggest ramping up spending over the coming decade to hit the target will push up the federal debt-to-GDP ratio by 6.3 percentage points in 2035.

By Kyle Duggan, The Canadian Press