The Parliamentary Budget Office reports that direct spending on the Canadian military could reach $163.6 billion by 2035 if the Liberal government meets NATO's five percent GDP target. The report highlights significant uncertainties, including potential impacts on economic activity and industrial capacity. It also notes that using an accrual accounting method would increase the budget deficit by $63.7 billion or 1.4% of GDP. The PBO presents two scenarios for equipment purchases: a gradual increase versus postponement, with trust in government management being crucial due to past issues with reprofiling and lapsing funds under previous administrations.
Written locally by qwen2.5:14b on 2026-10-06,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
The Parliamentary Budget Office (PBO) reported that direct spending on the Canadian military could exceed $163.6 billion by 2035, if the Liberal government adheres to NATO's benchmark target of dedicating five percent of GDP to defense expenditures. However, the PBO highlighted numerous uncertainties regarding long-term financial impacts and noted that using an accrual method for recording expenses would increase the budgetary deficit by $63.7 billion or 1.4% of GDP. Meeting these commitments will necessitate significant government expenditure increases with substantial economic implications, affecting industrial capacity and production in Canada.
Written for “Canadian Military Spending Growth” on 2026-10-06,
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Direct spending on Canadian military could reach more than $163B by 2035: budget watchdog
uncertain
spending → reach → 2035
Parliamentary Budget Office report says many unknowns remain, which could affect government finances
Direct spending on the Canadian military could reach $163.6 billion by 2035 under the Liberal government's proposal to meet NATO's benchmark target of five per cent of GDP, the Parliamentary Budget Office said Tuesday.
uncertain
Office → say → GDP
However, a lot of unknowns remain that could affect government finances down the road, the fiscal watchdog said in a new report.
uncertain
watchdog → remain → report
"Meeting Canada's defence commitments will require substantial increases in government expenditure and investment, with important implications for economic activity, industrial capacity and the composition of production in Canada," said the report penned by PBO researchers.
asserted
report → meet → researchers
Since the federal government uses an accrual method when counting defence expenditures — basically recording money when it is earned, and paying bills when they are owed, not when cash actually changes hands — the impact "would increase the budgetary deficit by $63.7 billion, or 1.4 per cent of GDP," the PBO said.
asserted
PBO → use → GDP
What the fiscal pain might be will depend on how Prime Minister Mark Carney's government manages the increase.
uncertain
government → depend → increase
The PBO presents two scenarios: one where there's a gradual, steady increase in the buying of new equipment and the other where purchases are postponed.
asserted
purchases → present → equipment
Ottawa plans Crown corporation to break defence procurement logjam
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corporation → plan → logjam
Under both the Liberal government of Justin Trudeau and the Conservative government of Stephen Harper, it became routine to postpone big-ticket equipment purchases.
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it → become → purchases
Money from some of those items was reprofiled to later years; in other cases, the funds lapsed and were returned to the federal treasury.
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funds → reprofile → treasury
In a previous report, the PBO tracked more than $18 billion set aside for military spending that lapsed under the Trudeau government.
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that → track → government
Carney ordered the injection of $9 billion into defence last year in order for Canada to meet the old NATO spending benchmark of two per cent of gross domestic product.
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Canada → order → product
The new target of five per cent of GDP — 3.5 per cent on direct military spending and 1.5 per cent on defence infrastructure — is to be phased in gradually over the next decade.
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target → phase → decade
Carney has said the plan is for Canada to hit a four per cent target on defence spending — 2.5 per cent and 1.5 per cent — by 2030.
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Canada → say → 2030
Parliamentary Budget Officer Annette Ryan appears at the Commons committee on government operations and estimates on Parliament Hill in Ottawa on June 16.
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Ryan → appear → June
Annette Ryan, who took over as parliamentary budget officer in the spring, told the House of Commons defence committee on Monday that the government's plan to reach the new target after 2030 is still a work in progress.
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plan → take → progress
"It'll take some time before we can actually see the effect of all of these investments," she told committee MPs.
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she → take → MPs
Ryan said the PBO has begun work to model what sort of economic impact the drastic increase in defence spending will have on federal finances and the Canadian economy.
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increase → say → finances
"This is a very rapid increase," Ryan said in French, noting there are procurement risks.
"
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Ryan → say → French
I think that Canada's industrial capacity may not be able to meet the need, which is a risk.…
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which → think → need
And we might ask, what are we getting back from all of these industrial and technological purchases?
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we → ask → purchases
That's another source of risk," she said.
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she → say → risk
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