Canada to Pitch G7 Nations on New Defence Bank to Boost Military Investment

Canada's foreign minister announced the country will lobby G7 nations to establish a new defence bank designed to streamline funding for military infrastructure and equipment.

Canada will use its G7 chairmanship to push for the creation of a new international defence bank, Foreign Minister Mélanie Joly announced Thursday, framing the proposal as a response to the "new security reality" facing Western nations.

Speaking at a defence industry conference in Ottawa, Joly said the institution would function similarly to development banks such as the European Bank for Reconstruction and Development, but would focus exclusively on financing military infrastructure, equipment procurement and defense industrial base expansion.

"We are living in a moment where the old assumptions about security no longer hold," Joly said. "Our allies are asking for more. Our adversaries are testing us. And our industrial base is struggling to keep pace. A defence bank would give us the financial tools to match the moment."

The proposal comes as NATO members scramble to increase defense spending following Russia's invasion of Ukraine and amid escalating tensions with China. Canada has faced repeated criticism from allies for falling short of NATO's 2 percent of GDP spending target.

Joly said the bank would provide low-interest loans, loan guarantees and other financing mechanisms to member countries seeking to accelerate military modernization. It would also support private sector defense contractors in expanding production capacity a critical need identified during the Ukraine war.

A senior European diplomat said the idea has gained traction among allies who view traditional defense procurement models as too slow and undercapitalized. "We need new financial instruments," the diplomat said.

Canada's proposal would require buy-in from other G7 members the United States, United Kingdom, France, Germany, Italy and Japan as well as coordination with NATO. Joly said she plans to raise the idea at the G7 foreign ministers' meeting next month and at the leaders' summit in June.

As Canada prepares to pitch G7 allies on a new defence bank to modernize military investment, The Silicon Review examines how this proposal could reshape the way Western nations fund their security and whether a new financial institution can bridge the gap between defense ambitions and fiscal realities.