Canada’s upcoming federal budget, to be tabled Tuesday, is expected to mark a historic shift in the country’s defence policy — laying the groundwork to meet NATO’s 5% defence spending target by 2035.
After years of lagging behind allies, the federal government under Prime Minister Mark Carney is set to inject billions into National Defence and related infrastructure, even as other departments face spending cuts to fund what Carney has called “generational investments.”
“I think what we’ll be doing in the budget is laying track to meet the five per cent target by 2035,” said Defence Minister David McGuinty, following a tour of the Hanwha Ocean Ltd. shipyard in South Korea — one of the bidders for Canada’s new submarine program.
The target, agreed upon by NATO allies, allocates 3.5% of GDP for military operations and 1.5% for defence-related infrastructure.
Submarine Program Tops the Wishlist
At the heart of the anticipated funding is the multi-billion-dollar submarine replacement program, a project that currently lacks dedicated financing.
“We’re still working to refine the costs,” said Vice-Admiral Angus Topshee, adding that the program fits within the government’s broader commitment to NATO’s target.
Defence analyst Dave Perry noted that while Carney has visited potential submarine suppliers, “the project does not yet have a budget,” making Tuesday’s announcement a critical moment to see if real funding will be assigned.
Billions in Backlog
The Parliamentary Budget Office estimates that between 2017 and 2023, the Department of National Defence underspent $18.3 billion on planned equipment acquisitions. Many initiatives from the 2017 defence policy remain stalled due to a lack of financial commitment.
Perry said this budget must include clear financial forecasts and not just pledges:
“Canadians need to see actual figures showing how spending will rise over time.”
Building Canada’s Defence Industry
Alongside rearmament, the government plans to strengthen the domestic defence industrial base — a key element of Carney’s economic agenda.
Recent agreements with the European Union and South Korea are expected to open new markets for Canadian defence manufacturers. However, experts estimate at least $800 million will be required to expand ammunition production and modernize manufacturing lines.
“It would make sense for the budget to show how Ottawa plans to build capacity and define its wider defence industrial strategy,” Perry added.
While the government’s Defence Industrial Strategy is still being finalized, the budget is expected to provide early details and fiscal direction.
A Strategic Shift
The push to meet NATO’s 5% spending target comes amid heightened global tensions — with ongoing conflicts in Ukraine and the Middle East — and increasing pressure from allies, especially the United States.
If fulfilled, the new commitments would place Canada among NATO’s top spenders, a dramatic turnaround for a country long criticized for underinvesting in defence.
The 2025 budget may not finalize every project, but it will chart a course for Canada’s most ambitious military modernization plan in decades.
