Canada’s federal government in Ottawa says it will boost its defence spending by as much as $30 billion to meet its obligations under the NATO military alliance.
As a member of the North Atlantic Treaty Organization (NATO), Canada is required to spend 2% of its gross domestic product (GDP) on defence.
But until now, Canada has never met that target, spending only 1.45% of its GDP on defence in 2024.
However, Prime Minister Mark Carney is looking to close the gap, pledging to lift the country’s defence spending to 2% of GDP in the current fiscal year that runs until March 31, 2026.
The increased defence spending could be a boon to leading defence contractors such as Lockheed Martin (LMT), Northrop Grumman (NOC), and RTX Corp. (RTX).
Ottawa is projected to spend $52.3 billion on defence in the current 2025-26 fiscal year.
Canada’s parliamentary budget office has estimated that the federal government would need to spend $81.9 billion to hit NATO’s 2% GDP target, an increase of $29.6 billion from current levels.
Canada has long been one of the biggest laggards among NATO members when it comes to meeting its defence spending targets.
Currently, 22 of 32 member countries meet or exceed NATO’s 2% defence spending target.
Canada is expected to spend the additional defence money on new submarines, military aircraft, and artillery.
Part of the new spending will go towards Canada’s participation in the $234 billion U.S. “ReArm Europe” initiative, and to bolster the Canadian Coast Guard with new equipment and transport.
