Canada releases its federal Budget 2025: Canada Strong, with $81-billion funding package for the Canadian Armed Forces — including a Buy Canadian procurement plan, making this the largest defence investment in decades.
Budget 2025 proposes to provide $81.8 billion over five years on a cash basis, starting in 2025-26, to rebuild, rearm, and reinvest in the Canadian Armed Forces (CAF). This includes over $9 billion in 2025-26 that was announced by the Prime Minister in June 2025. Key investments include:
- $20.4 billion over five years, to recruit and retain a strong fighting force, including generational pay raises for the CAF, and support CAF health care.
- $19.0 billion over five years to repair and sustain CAF capabilities and invest in defence infrastructure, including expanding ammunition and training infrastructure.
- $10.9 billion over five years for upgrades to Department of National Defence, CAF, and Communications Security Establishment digital infrastructure, including those needed for modern warfare, such as cyber defence.
- $17.9 billion over five years to expand Canada’s military capabilities, including investments in additional logistics utility, light utility, and armoured vehicles, counter-drone and long-range precision strike capabilities, and domestic ammunition production, among other investments.
- $6.6 billion over five years, starting in 2025-26, to strengthen Canada’s defence industry through a Defence Industrial Strategy. As the Strategy is implemented, starting with initial investments announced in Budget 2025, Canada will develop its defence industrial base so that more of the country’s military capabilities are procured from Canadian supply chains. (See below for additional details).
- $6.2 billion over five years to expand Canada’s defence partnerships, including expanded military assistance to Ukraine and increased military training and international policy programming.
- $805 million over five years to the Canadian Coast Guard, the Canadian Security Intelligence Service, and Public Services and Procurement Canada for complementary initiatives to support Canada’s defence capabilities.
Budget 2025: Canada Strong is Canada’s plan to transform the economy from one that is reliant on a single trade partner, to one that is stronger, more self-sufficient, and more resilient to global shocks. The plan builds on Canada’s strengths – world-class industries, skilled and talented workers, diverse trade partnerships, and a strong domestic market where Canadians can be their own best customers. The government is creating an economy by Canadians, for Canadians.
Canada’s new government is delivering an investment budget. They are spending less on government operations – and investing more in the workers, businesses, and nation-building infrastructure that will grow the economy. Budget 2025 delivers on the government’s Comprehensive Expenditure Review to modernize government, improve efficiencies, and deliver better results and services for Canadians. It includes a total of $60 billion in savings and revenues over five years, and makes generational investments in housing, infrastructure, defence, productivity and competitiveness. These are the smart, strategic investments that will enable $1 trillion in total investments over the next five years through smarter public spending and stronger capital investment.
The budget serves as the annual blueprint for the government’s economic agenda, prepared by the Department of Finance Canada. The federal budget released in Fall 2025 will be followed by an economic and fiscal update in the spring as the new fiscal year begins.
The pressure is on for Canada to increase its defence spending with committing to meet the North Atlantic Treaty Organization’s (NATO) 2% defence-spending target this year and speed up investments in the years ahead to put Canada on a path to meeting NATO’s 5% Defence Investment Pledge by 2035.
This builds on the commitments made last year in Canada’s defence policy, Our North, Strong and Free (ONSAF), to strengthen Canada’s sovereignty, security, and prosperity, and drive economic growth in this pivotal moment. This plan includes a cash increase of over $9 billion ($8.3 billion on an accrual basis) in defence investment this fiscal year (2025-26).
READ: Carney Commits to Hitting NATO 2% Target This Year
In October 2025, Carney announced the creation of the new Defence Investment Agency, which will overhaul and streamline Canada’s defence procurement. This new agency will build domestic manufacturing and supply chains, and create new careers, so the Canadian Armed Forces have the world-class equipment they need.
Defence Investment Agency will consolidate procurement processes – removing duplicative approvals and red tape, accelerating defence procurement, and providing industry with greater clarity and certainty. With a centralized process of review and approval, procurements will advance faster. Specialized staff at the agency will have expertise in defence acquisitions, ensuring focused planning and execution.
The Defence Investment Agency will prioritise partnerships and investments to meet 2% of GDP on defence spending this year and meet NATO’s 5% Defence Investment Pledge by 2035.
READ: PM Carney Launches New Defence Investment Agency to Rebuild, Rearm, and Reinvest in the CAF
Countries across the world are facing global economic challenges – and Canada is no different. Budget 2025 is Canada’s new government’s plan to address these challenges from a position of strength, determination, and action.
The renewed commitment to defence will create good, high-paying careers for Canadian workers and drive investments that strengthen the nation’s economic, infrastructure, and collective resilience.
“The global uncertainty we are facing demands bold action to secure Canada’s future. Budget 2025 is an investment budget. We are making generational investments to meet the moment and ensure our country doesn’t just weather this moment but thrives in it. This is our moment to build Canada Strong and our plan is clear – we will build our economy, protect our country, and empower you to get ahead. When we play to our strengths, we can create more for ourselves than can ever be taken away.”
The Honourable François-Philippe Champagne, Minister of Finance and National Revenue
Procurement Updates
Recent updates on procurement projects include Canadian Patrol Submarine Project (CPSP), as Canada has identified German company Thyssen Krupp Marine Systems (TKMS) and Korean company Hanwha Ocean as the 2 qualified suppliers for the CPSP.
PM Carney, recenty visited Hanwha Ocean Shipyard in Geoje, South Korea to tour Hanwha’s KSS-III Canadian Patrol Submarine (KSS-III CPS), along with Vice-Admiral Angus Topshee, commander of the Royal Canadian Navy, and Defence Minister David McGuinty.
READ: PM Carney Visits Hanwha Ocean for CPSP Program
The NSS is delivered by three major shipbuilders — Davie Shipbuilding, Irving Shipbuilding, and Seaspan Shipyards — each playing a crucial role in the construction and maintenance of Canada’s fleet.
- READ: Canada awards $3.25-Billion contract to Davie for construction of new CCG polar icebreaker
- WATCH: JSS1 HMCS Protecteur – CDR Visits Seaspan to Tour the First Joint Support Ship
- READ: Full-Rate Production on the First River-Class Destroyer is Now Underway
ADDITIONAL INFO
- Canada has the fiscal capacity to meet its ambition:
- Canada has the lowest net debt-to-GDP ratio in the G7 at 13.3 per cent according to the IMF October 2025 Fiscal Monitor. Canada also has one of the lowest deficit-to-GDP ratios in the G7, second only to Japan. This strong fiscal position enables us to respond to global challenges.
- Canada is one of only two G7 economies with a AAA credit rating, making Canada one of the best places to invest in the world.
- Canada has the best deal of any U.S. trading partner, with 85 per cent of our trade tariff-free. While some sectors remain deeply impacted, overall, Canadian exporters benefit from the lowest average U.S. tariff of any country at 5.4 per cent.
- Budget 2025 rests on two fiscal anchors:
- Balancing day-to-day operating spending with revenues by 2028–29, shifting spending toward investments that grow the economy; and
- Maintaining a declining deficit-to-GDP ratio to ensure disciplined fiscal management for future generations.
- In addition to the two fiscal anchors, Budget 2025 enables $1 trillion in total investments over the next five years through smarter public spending and stronger capital investment.
- Becoming our own best customer: Our new Buy Canadian Policy will ensure public dollars will be used to strengthen our supply chains, and support homegrown innovation. When the government spends, we will select Canadian suppliers by default, wherever possible. By launching our Defence Industrial Strategy, we will grow our defence sector, increasing the capacity and competitiveness of homegrown defence suppliers.
- Investing in defence and security: Our government is making a generational investment in defence that will create good, high-paying careers for Canadians, and strengthen our economy and collective resilience.
