The federal Liberal government, meanwhile, points to a sharp increase in spending on equipment as an equally valid measure of Canada's North Atlantic Treaty Organisation commitment.
"We still do not have fair burden-sharing within our alliance", said Stoltenberg. "All allies have agreed to do it at the highest level".
According to figures from NATO, Britain has met the minimum 2% defence spending figure, but according to a report released by thinktank the International Institute for Strategic Studies, the United Kingdom falls short with 1.98%.
Mr Trump has proposed raising U.S. military spending by $54 billion dollars, but his Defence Secretary Jim Mattis has warned NATO's European allies that Washington could "moderate its commitment" if they do not increase their spending.
Romania expects to reach the requirement this year, and Lithuania and Latvia both expect to do so in 2018, according to the report. His aides have said Trump wants to see progress on that by the end of this year and that Washington could otherwise "moderate" its support.
France, which is among the leading members of the alliance, reportedly spent 1.79% of national income on its armed forces in 2016, which was slightly down from 2015.
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Despite an overall rise for European members of the alliance, military expenditures remained below the threshold of 2% of GDP espoused by US President Donald Trump in the weeks following his entrance to the Oval Office.
Trump has also called for a $54 billion hike in U.S. defence expenditure, now at more than $600 billion, winning broad support but also criticism that the money could be better spent elsewhere.
Stoltenberg's report said Canada saw a small bump in defence spending in 2016, which pushed the percentage of GDP spent on defence to an estimated 1.02 per cent, up from 0.98 per cent.
Defense spending among European member states ticked up slightly in 2016 compared to the previous year, NATO's annual report found.
"When you are reducing spending at times of easing tensions, we have to be able to increase spending when tensions are increasing", Stoltenberg added.
The increase helped Canada move up to 20th from 23rd in terms of spending among NATO's 28 allies, putting it in a three-way tie with Hungary and Slovenia.