After decades of underspending on defence, Ottawa has finally put forward a budget that commits to spending two per cent of GDP on the military.
This means Canada will meet its NATO spending commitment for the first time since the target was formally set in 2014, joining most other members of the alliance in finally doing so.
“In an increasingly dangerous and divided world, Canada must be ready to defend our people and values, to secure our sovereignty, and to stand as a strong, reliable partner with our allies,” says the budget, released Nov. 4.
In June, Prime Minister Mark Carney said Canada would meet the NATO benchmark this fiscal year, which ends March 31. With $62.7 billion in defence spending slated for 2025-2026, Carney’s inaugural budget — which projects an overall deficit of $78 billion on a total $586 billion in spending — meets that mark.
It also proposes $82 billion in new defence commitments over the next five years. In June, Carney further pledged that Canada would spend five per cent of GDP on defence by 2035, in response to pressure from the Trump administration.
The Liberal government is presenting the spending as critical to ensuring national security in an increasingly precarious geopolitical environment, but also as an important opportunity for economic growth.
“Our renewed commitment to defence will create good, high-paying careers for Canadian workers and drive investments that strengthen our economic, infrastructure, and collective resilience,” the budget says.
Readiness and personnel
In response to chronic military personnel shortages, Budget 2025 proposes $20 billion over five years to recruit and retain members of the CAF. This includes a 15 per cent pay raise for most regular force members, and a 13 per cent increase for reservists.
“Our Forces members are second to none, and they deserve a pay raise to recognize their service in defending Canadians and asserting our sovereignty,” said Minister of Defence David McGuinty in an August statement first announcing the raise.
Higher salaries are just one of the ways Ottawa is trying to meet its demand for troops. The Department of National Defence says it aims to expand the CAF’s regular, non-reserve force to 71,500 personnel by 2032, up from about 65,000 members today.
In an attempt to address personnel shortages, the department has also taken steps to ease the CAF’s recruitment process, including dropping its cognitive aptitude test and allowing permanent residents to join.
Defence Industrial Strategy
The Carney government is framing Canada’s nascent defence industry as an economic catalyst that requires investment — not just for the sake of national security, but also as a driver of growth.
On Oct. 2, Carney unveiled a new Defence Investment Agency, which his office says will consolidate review processes to accelerate defence procurement and provide industry with greater clarity and certainty.
“The new agency will bolster our defence industrial capacity, create new careers, and ensure that in this new era, Canada’s leadership is not defined by the strength of our values, but also by the value of our strength,” Carney said in an Oct. 2 statement announcing the new agency.
Budget 2025 proposes $30.8 million over four years to establish the Defence Investment Agency. The agency will prioritize defence procurement projects valued at $100 million or more.
The budget also lays out $6.6 billion over five years, beginning this year, to strengthen Canada’s defence industry through a new Defence Industrial Strategy.
This strategy aims to “improve access to capital, drive research and innovation, bolster domestic supply chains, and grow critical resource stockpiles,” the budget says.
Minister of Finance François-Philippe Champagne has indicated dual-use projects that serve both a civilian and military role will be eligible for federal funding under the new investment approach.
“Every company in the country should basically have a defence strategy, because there will be significant investments made over the coming years,” said Champagne, speaking to reporters at a Nov. 4 press conference in Ottawa.
Overseas ops continued
Budget 2025 outlines numerous operational priorities for the Canadian military, which currently maintains a troop presence in parts of Europe, the Middle East and the Indo-Pacific.
The budget proposes $17.9 billion over five years for investments in additional logistics, utility and armoured vehicles, counter-drone technology and long-range precision strike capabilities.
That investment will contribute to $2.7 billion over the next three fiscal years for Operation Reassurance. As Canadian Affairs has previously reported, the Latvia-based mission is currently Canada’s largest foreign operation, which helps prepare multinational NATO troops to deter Russian aggression on NATO’s eastern flank.
The budget also proposes $300 million over three years for Operation Amarna, which replaces Operations Artemis and Impact as part of Canada’s contribution to strengthening peace and security in the Middle East.
As part of this mission, CAF troops work with regional partners on military exercises and defence diplomacy, and also support NATO Mission Iraq and continued capacity building in Jordan and Lebanon.
The budget also commits Ottawa to continuing to support defence partners abroad. This includes $6.2 billion over five years to expand military assistance to Ukraine, and to increase military training and international policy programming.
“As the world grows more volatile and dangerous, now more than ever, Canada must be ready and able to defend our territory, our people, and our values to secure our sovereignty and to protect and uphold our commitments to our Allies,” the budget says.
Correction, November 6, 2025 10:25 pm: A previous version of this article stated, "Minister of Finance François-Philippe Champagne has indicated dual-use projects that serve both a military and defence role will be eligible for federal funding under the new investment approach." The article has been updated to clarify that dual-use projects also have civilian applications.
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