New multinational defence financier may be our best hope of funding massive military spending plans
Thursday, 18 June 2026
Tim Hurdle is a former National Party senior adviser and is a director of several companies, including Museum Street Strategies, a public affairs firm.
OPINION: New Zealand has made strong announcements about the need to raise defence funding to purchase new and replacement capabilities that protect our sovereign interests.
Yet, with competing demands for healthcare, education and infrastructure, increasing defence expenditure is politically difficult. Meeting even the baseline 2% GDP defence target will cost billions, a political nightmare for governments already squeezed by high borrowing costs.
Traditional state finances are simply ill-equipped to absorb the massive expenditures required to modernise military capabilities.
There is a further structural challenge: financing the capital required. Standard budget rules make it incredibly difficult to commit to the long-term funding cycles required for multi-decade procurement projects like frigates, planes, or comprehensive satellite networks.
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These challenges are worldwide. Led by Canada, moves are underway to establish a new multinational institutional financier, the Defence, Security and Resilience Bank (DSRB) to meet the needs of allied nations as they rearm.
While the complete list of the 19 founders has not been fully disclosed, New Zealand is alleged to be one of them. Initial operationalisation is slated for the end of 2026 or 2027, and the DSRB aims for a diverse membership of up to 40 allied nations. The finalised charter of the entity will undergo a ratification process within the respective parliaments of the founding member countries.
The DSRB would function as a multilateral lending institution, similar to the World Bank or the Asian Development Bank, but explicitly mandated to finance collective defence, scale industrial production, and fortify allied supply chains.
For New Zealand, the DSRB could help achieve the ambitious objectives outlined in its 2025 Defence Capability Plan with minimal impact on domestic economic stability.
The DSRB’s architects argue that only a dedicated, capitalised multilateral institution can leverage the necessary financial mass to overcome sovereign constraints. Existing financial institutions cannot simply expand their operations due to severe structural, regulatory and mandate-driven limitations.
Traditional multilateral development banks like the World Bank and the European Investment Bank (EIB) were constructed in the aftermath of global conflict specifically to finance civilian infrastructure, poverty reduction and sustainable development. International treaties strictly prohibit them from financing lethal armaments or core military platforms.
The DSRB bypasses this problem, as the first multilateral institution in history with a charter that explicitly mandates the support, financing and scaling of lethal defence capabilities.
Commercial banks are also increasingly constrained by strict Environmental, Social, and Governance (ESG) criteria. Over the past two decades, ESG frameworks driven by institutional investors have systematically categorised defence manufacturing, particularly lethal technologies and munitions, as prohibited sectors for investment. Consequently, the small and medium-sized enterprises (SMEs) that form the critical backbone of the defence supply chain are routinely denied access to commercial credit, creating severe supply chain bottlenecks.
The DSRB functions as a structural bridge to resolve this market failure by absorbing and underwriting the risk of defence financing. This essentially “de-risks” the sector, allowing commercial partners to bypass internal ESG restrictions by lending against a sovereign-backed guarantee rather than directly absorbing defence sector risk. Major international banks have rapidly recognised the value of this model and have formally aligned with the DSRB as strategic partners.
The financial stability of the bank relies on founding “anchor” nations with robust, unimpeachable credit ratings to build its initial balance sheet. Canada, Germany and Luxembourg hold the vital AAA status required to underwrite the institution. Beyond standard sovereign contributions, one of the most innovative and politically sensitive funding mechanisms proposed for the DSRB's initial capitalisation involves utilising frozen Russian central bank assets. This would rapidly scale the bank's balance sheet to unprecedented levels without burdening allied taxpayers.
The architects of the bank explicitly designed the founding charter to recruit and integrate partners in the Indo-Pacific. This broadens the capital base and diversifies the geographic risk profile of the institution, further supporting its AAA credit rating.
For New Zealand, this mechanism could allow the government to amortise the astronomical cost of multi-billion-dollar replacement assets, like frigates, over 15 to 30 years at rates far more favourable than independent sovereign issuance on the open market.
Furthermore, the DSRB could encourage our domestic commercial banks to lend directly to New Zealand aerospace tech firms, dual-use startups, and advanced component manufacturers. Providing access to this low-cost, long-term capital ensures that New Zealand's domestic defence industry is not left behind as allied supply chains consolidate and expand globally.
This stimulates domestic economic growth, creates high-skill engineering jobs, and ensures New Zealand possesses the sovereign industrial depth required to independently maintain and upgrade its equipment.
We have yet to hear any official government signals on the DSRB. However, if New Zealand opts out of membership due to domestic political pressure or bureaucratic inertia, we will be excluded from the largest, most consequential pool of defence capital mobilised since the Cold War.