The Parliamentary Budget Officer (PBO) released a report on the state of Canada's finances, expressing concerns that rising defense spending may jeopardize the government's ability to balance the budget.
The PBO's report found that Canada's defense spending has increased significantly since 2015, from $18.9 billion to $32.7 billion in 2022. The PBO projects that defense spending will continue to rise in the coming years, reaching $44.2 billion by 2026-27. This increase is primarily due to the Liberal government's 2017 pledge to spend 2% of GDP on defense by 2026.
However, the PBO warns that this increased spending will put pressure on the government's finances. The PBO notes that the government has already increased its budget deficit by $19.1 billion in order to fund defense spending. The PBO also notes that the government's debt-to-GDP ratio is expected to increase to 48.9% by 2026-27, up from 46.5% in 2022-23.
The PBO recommends that the government take steps to control defense spending or find alternative sources of revenue to fund defense spending. The PBO also recommends that the government develop a long-term plan for defense spending to ensure that it is sustainable in the future.
The PBO's report is likely to reignite the debate over Canada's defense spending. Some argue that Canada needs to increase its defense spending in order to meet its commitments to NATO and to protect its Arctic sovereignty. Others argue that Canada can't afford to continue increasing defense spending, especially in light of the COVID-19 pandemic and the resulting economic downturn.
The debate over defense spending is likely to continue in the lead-up to the next federal election in 2025. The Liberal government has already pledged to increase defense spending to 2% of GDP by 2026. However, it is unclear whether the government will be able to meet this commitment without further increasing the budget deficit or raising taxes.
