Countries’ ability to credibly meet their NATO defence spending targets depends on their fiscal position. In 2024, Canada and many other NATO members remained below the 2 percent target. By 2025, as shown by the graph, Canada and most members had reached the 2 percent target.
In terms of government debt, Canada sits to the right of the average debt line, reflecting its relatively high level of government indebtedness. As Canada works toward the new 3.5 percent target, its fiscal position will limit how much it can finance the increase in defence spending through additional borrowing.
For more on why Canada needs to present a credible fiscal plan to reach the NATO commitment, see this Intelligence Memo.
Note: Gross general government debt includes federal and provincial debt and excludes the assets of the Canada and Quebec Pension Plans. The horizontal lines denote the previous 2 percent target and the new 3.5 percent target for core defence spending, while the vertical line denotes the average level of government indebtedness.
Sources: NATO, IMF, authors’ calculations.
