Fiscal Implications of Meeting NATO’s 5% Commitment
Parliamentary Budget Officer estimates that meeting NATO’s 5% of GDP defence spending target by 2035 would require gradually raising core defence spending from 2 to 3.5% of GDP, costing an average of $33.5 billion per year in additional spending over the next decade. Because the government has not published detailed projections, the report uses scenario analysis to assess fiscal impacts, assuming ancillary defence spending remains at 1.5% of GDP. Under this scenario, the federal budget deficit would rise by $63 billion and the debt-to-GDP ratio by 6.3 percentage points by 2035–36.
