According to the annual report from NATO’s secretary general released on Thursday, Canada has met the important political milestone of achieving the alliance’s defence spending target of two per cent of its gross domestic product.
This marks the first occasion since the late 1980s, at the close of the Cold War, that the nation has reached this goal, which has gained substantial political and symbolic importance in recent years.
The Liberal administration realized this objective by adding $9.3 billion to the budget of the Department of National Defence last June, raising the total defence spending to slightly over $61 billion.
Despite the significant increase in funding, the NATO report indicated that Canada narrowly exceeded the benchmark, estimating its spending at exactly two per cent of GDP. It remains among the lowest spenders in the alliance, along with Belgium, Spain, Albania, and Portugal.
The countries with the highest proportions of GDP allocated to defence included Poland (4.3), Lithuania (4.0), Latvia (3.74), Estonia (3.42), and Denmark (3.34). The United States was positioned seventh overall at 3.19.
Prime Minister Mark Carney had committed to achieving the two per cent target by the conclusion of the fiscal year on March 31, responding to persistent pressure from allies such as the United States.
“This is the first instance since the fall of the Berlin Wall that Canada will allocate two per cent of GDP to defence,” Carney remarked at an event in Halifax’s naval dockyard, highlighting an increase in military interest and recruitment since the government made this pledge.
“Canadians are answering our renewed commitment and the call to serve.”
This accomplishment represents a significant shift from nearly two years ago when former Prime Minister Justin Trudeau described the two per cent target as a “crass mathematical calculation,” allegedly indicating to allies that Canada would never fulfill it.
“We have worked extremely hard to execute this plan,” Defence Minister David McGuinty stated in an interview with CBC News just before the NATO report was released. “This is a significant day for us.”
Canada reached this milestone shortly after NATO leaders pledged to further increase defence spending to five per cent of GDP over the next decade, which includes 3.5 per cent dedicated to direct military expenses and 1.5 per cent for defence infrastructure.
Prime Minister Mark Carney announced Canada crossed NATO’s defence spending benchmark of two per cent of gross domestic product in Halifax on Thursday. ‘That’s the highest level of defence spending relative to the size of our economy since the fall of the Berlin Wall,’ Carney said.
Reaching the two per cent target was never guaranteed, as the Defence Department lacked the institutional capability to fully utilize its budget over the years. It frequently had to return unspent billions to the federal Treasury.
McGuinty acknowledged that many were doubtful, but with the prime minister’s political support, the target was achieved.
“We were disciplined. We were strategic. We were focused,” McGuinty stated. “We quickly developed a detailed plan within about 60 days. Then we presented it to the Treasury Board and insisted on executing this plan.”
He noted that federal officials had informed him and other ministers that the spending plan would take longer than the March 31 deadline. “We insisted, ‘No, that’s not acceptable. You have 100 days. Get it done in 100 days.’ They completed it in 101 days.”
The benchmark was partially reached through restructuring within the federal government, moving some agencies, like the Canadian Coast Guard, under the Defence Department, thereby counting towards the NATO target. Additionally, it included significant pay raises for military personnel and investments in base infrastructure and modernization.
Conservative defence critic James Bezan questioned the meaningfulness of this achievement for the military itself.
“We know that through creative accounting, government spending on national defence has risen by over $10 billion. However, that has not translated into enhanced capabilities for the Canadian Armed Forces,” Bezan remarked.
The federal government is spending $307 million for 30,000 new made-in-Canada rifles. These will replace the 35-year-old rifles the military is currently using. Secretary of state for defence procurement Stephen Fuhr joins Power & Politics to discuss the government’s efforts to ramp up defence spending.
At a conference in Calgary, Canada’s military representative emphasized the need to convert statistics—like the two per cent figure—into actual personnel and equipment.
“Happy two per cent day. Apparently we’ve achieved it,” stated Lt.-Gen. Greg Smith during the event at the University of Calgary.
“We have to continue progressing. We require capability.”
While the prime minister is credited with prioritizing defence spending, defence analyst Dave Perry notes that there is now a growing consensus across political lines that such investment is essential.
Conservative MP James Bezan responded to Prime Minister Mark Carney’s announcement that Canada crossed NATO’s defence spending benchmark of two per cent of gross domestic product. Bezan said the government’s increased defence spending is an accounting ‘illusion.’
“It hasn’t been solely Mr. Carney,” Perry remarked, president of the Canadian Global Affairs Institute. “In the last federal election, every party pledged to allocate two per cent of GDP for defence. This marks a significant shift in political agreement regarding defence compared to the previous decade when there was consensus that it was unnecessary to meet this target.”
Perry indicated that this perspective began to change a year ago.
Defence spending announcements
In the past month, the Liberal government has disclosed over $42 billion in defence-related expenditures, much of which is earmarked for future years and programs, including infrastructure in the Arctic.
Among the immediate spending measures announced last week was the initial phase of acquiring new rifles for the army. This will amount to $307 million for taxpayers; however, the Defence Department, the Defence Investment Agency, and the procurement services department declined to provide a detailed breakdown of the total project budget.
The two per cent target has been a contentious issue in recent years, particularly when U.S. President Donald Trump, during his 2024 re-election campaign, threatened not to defend allies who fell short of the goal.
Brig.-Gen. Daniel Riviere of the Joint Task Force (North) addresses members from the Canadian Armed Forces, NATO allies, and other government departments in Cambridge Bay, Nunavut, on Feb. 19. (Carlos Osorio/Reuters)
The target’s political roots trace back to November 2002, established during the Prague Capabilities Commitment (PCC), named after the city where NATO leaders decided to set a budget benchmark for member nations.
The administration of former U.S. President George W. Bush attempted to enforce this target as mandatory but was unsuccessful, as noted in a 2019 research paper authored for Germany’s federal security academy.
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As a result, the two per cent target has often been viewed more as a guideline than a binding requirement. Many nations, including Canada, largely disregarded it until Russia’s annexation of Crimea in 2014.
Moreover, NATO has not consistently monitored member nations’ defence expenditures as a percentage of their GDP. This practice only commenced in 1974, as per records from the alliance’s archives.
During that period, Canada’s military spending as a proportion of its economic output was at 2.7 per cent of GDP. This figure declined in the late 1970s during a period of détente but reversed course in the 1980s as tensions with the former Soviet Union escalated.
