Canada's Defense Spending Dilemma: Balancing NATO Goals and Fiscal Realities

Canada aims to double defense spending to meet NATO's 2% GDP target by 2032-33, potentially straining fiscal guidelines. The Parliamentary Budget Office warns this could challenge Ottawa's goal to reduce debt and deficit ratios. Debate continues over the feasibility of achieving these intertwined fiscal goals.

Canada faces the challenge of doubling its current defense budget by 2032-33 to meet NATO's spending targets, which could conflict with existing fiscal anchors designed to curb expenses, according to a parliamentary watchdog report released Wednesday.

Prime Minister Justin Trudeau's earlier commitment to raise defense spending to at least 2% of GDP has drawn scrutiny, with the Parliamentary Budget Office highlighting potential conflicts with the government's objectives to reduce its fiscal deficit proportionally to GDP.

While the increased spending may not breach the debt-to-GDP target, projections indicate it could impact the deficit. The PBO report, differing from National Defense estimates, forecasts military expenditure at 1.58% of GDP by 2029-30, raising questions about reaching the NATO target.

(With inputs from agencies.)