Question Period Note: NATO investment pledge

• Canada achieved its NATO 2% GDP defence spending target in fiscal year 2025-26.
• Approximately $63.45 billion was spent in this timeframe across the Defence Team and other government departments.
• This includes $2.1 billion to deliver the largest pay increase for Canadian Armed Forces members in a generation.
• In March, I also announced a $1.4 billion investment in domestic ammunition production through the Canadian Defence Industry Resilience Program.
• Reaching 2% is not an endpoint, but the beginning of a sustained effort to rebuild, rearm, and reinvest in the CAF.
• Canada is now on a path to meet our NATO Defence Investment Pledge of 5% of GDP by 2035.
• To meet this pledge, Canada will invest 3.5% of GDP in core military capabilities, and a further 1.5% in critical defence and security-related investments.
• As defence investments grow, the immediate priority will be to strengthen the Defence Team's foundation — its people, infrastructure, and equipment sustainment — we are advancing major procurements ranging from modern aircraft to new submarines.
  If pressed on financial contributions by the Canadian Coast Guard to the NATO spending target:
• National Defence follows guidelines established by NATO and agreed to by Allies to ensure a common approach to defining defence expenditures.
• In fiscal year 2023-24, over $750 million of the Canadian Coast Guard’s budget was included in Canada’s defence spending calculations.
• With the transition of the Canadian Coast Guard into the Defence portfolio, 100% of its budget will count towards our NATO commitment going forward.

Defence Spending – 2% of Gross Domestic Product Target
* In June 2025, the Prime Minister’s announced over $9 billion in defence investments to position Canada to meet its 2% Gross Domestic Product (GDP) target to the North Atlantic Treaty Organization (NATO).
* Budget 2025 included $81.8 billion over five years on defence, including $17.9 billion to expand military capabilities, and $19 billion to repair and sustain capabilities and invest in defence infrastructure.
Areas of Defence Investment and Notable Initiatives
* Improving serviceability and operational readiness, resulting in higher equipment availability and improved Canadian Armed Forces (CAF) readiness. This includes:
* Eight ammunition depot projects advanced since fall 2025;
* More than $8 billion nationwide in active infrastructure investments;
* $60 million to acquire a 140-unit apartment complex in Dartmouth, Nova Scotia; and
* $82.5 million to acquire the 475-acre Halifax Gate property.
* Delivering new military capabilities, resulting in faster delivery to address evolving threats. This includes:
* $200 million domestic investment in Space Launch capability;
* $307 million contract to Colt Canada for the Canadian Modular Assault Rifle Initiative; and
* $118 million contract to deliver advanced digital periscopes to the Victoria-class submarine.
* Strengthening Canada’s economy and defence industry, resulting in a more resilient, competitive, and sovereign defence industrial base built in Canada. This includes:
* $6.6 billion over five years ($2.1 billion in fiscal year 2025-26) for Canada’s defence industry through the Defence Industrial Strategy;
* $1.4 billion investment for the Canadian Defence Industry Resilience Program;
* $379.2 million to establish the new Regional Defence Investment Initiative;
* $241 million for the Industrial Research Assistance Program’s new Defence Industry Assist initiative;
* $92 million to launch Phase 1 of the Canadian Quantum Champions Program; and
* $29.4 million to establish the Maritime Defence Innovation Secure Hub.
* Rebuilding the Defence Team, resulting in strengthened defence readiness by a renewed military and civilian capacity. This includes:
* $2.1 billion CAF pay increase, the largest in a generation;
* $3.7 billion for military housing through the National Housing Construction Program;
* 7,000 Regular Force recruits targeted (fiscal year 2025-26);
* 3,200 new Reserve enrollments (fiscal year 2025-26); and
* 2,284 net new Defence Team civilian hires.
* Securing Canada and the arctic, resulting in enhanced arctic sovereignty and operational reach. This includes:
* Progress on Arctic Over-the-Horizon Radar;
* Ongoing North American Aerospace Defense Command modernization with the United States; and
* Integration of the Canadian Coast Guard (CCG) and Defence Team.
* CAF presence around the world, resulting in credible and sustained CAF operational contribution with Allies.
* Operations UNIFIER and REASSURANCE renewed with $2 billion additional military assistance to Ukraine; and
* Sustained CAF contribution to NATO missions.
NATO Investment Pledge
* On June 25, 2025, Canada and its NATO Allies agreed to a new Defence Investment Pledge of 5% of GDP, annually, by 2035.
* As part of this 5% pledge, Canada will invest 3.5% of GDP for core defence expenditures, which includes strengthening the foundation of National Defence through investments in our people, capabilities, infrastructure, and digital capabilities.
* The remaining 1.5% of GDP will be dedicated to investments in critical defence and security- related expenditures, which will – among other things – protect our critical infrastructure, defend our networks, unleash innovation, and strengthen our defence industrial base.
Other Government Departments and Agencies’ Contributions to the NATO Investment Pledge
* On September 2, 2025, the CCG joined the National Defence portfolio resulting in the entirety of its budget being attributed to Canada’s defence expenditures on an ongoing basis whereas previously only 67% of its budget was counted.
* Eligible funding from other government departments also contributes to Canada’s defence expenditures.
* This includes Veterans Affairs Canada, Treasury Board of Canada Secretariat, Global Affairs Canada, Shared Services Canada, and others that cannot be disclosed publicly.
Parliamentary Budget Officer (PBO) Report (2026)
* On February 5, 2026, the PBO released a report on “Fiscal Implications of Meeting NATO’s 5% Commitment”.
* The report examined the fiscal implications of Canada’s commitment to reach the NATO military spending target of 5% of GDP by 2035.
* The PBO estimates that meeting the 5% commitment by gradually increasing core defence spending from 2.0% in 2026 to 3.5% by 2035 will require additional defence spending averaging approximately $33.5 billion per year in cash expenditures over the next 10 years.
* It estimates that the additional core defence spending required to meet the NATO 5% commitment will increase the budgetary deficit by $63.0 billion (1.4% of GDP) and the federal debt-to-GDP ratio by 6.3% of GDP by fiscal year 2035-36.

Quick facts

• On March 26, 2026, Prime Minister Carney announced that Canada achieved its North Atlantic Treaty Organization’s (NATO) 2% gross domestic product defence spending target.
  Budget 2025
• Budget 2025 provided $81.8 billion over five years on a cash basis, starting in 2025-26, to rebuild, rearm, and reinvest in the Canadian Armed Forces.
• This includes the over $9 billion announced by the Prime Minister in June 2025.
  NATO Common-Funded Budget
• In addition to investing in their own armed forces, all NATO Allies contribute directly to NATO’s budget based on an agreed cost-share formula derived from Gross National Income.
• Canada is the 6th largest contributor to NATO’s common-funded budget at approximately 6.6%.
  Responsible Principals: Assistant Deputy Ministers (Policy)/(Finance)/(Materiel), Vice Chief of the Defence Staff, Canadian Coast Guard, Department of National Defence and Canadian Armed Forces Legal Advisor
  Drafted by: Director General Policy Coordination: Parliamentary Affairs
  Date Approved: April 13, 2026