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OTTAWA — The Carney government is forecasting a $78.3-billion deficit for 2025-26, the largest in Canadian history outside the COVID-19 pandemic and the country’s tenth straight year without a balanced budget.
The Montreal Economic Institute says the federal budget repackages record spending as investments while failing to outline a credible path back to balance.
“Canadians should find a deficit this large extremely troubling,” said MEI economist Emmanuelle B. Faubert. “It is one thing to spend money you do not have. It is another to shirk responsibility for it.”
The deficit is up sharply from last year’s $48.3-billion shortfall. The national debt is expected to reach $1.48 trillion, which the MEI says equals more than $33,000 owed by every newborn in Canada. Federal debt is projected to grow a further 21 per cent by 2030, reaching $1.79 trillion.
Interest payments are also rising. Ottawa expects to spend $55.6 billion on debt servicing next year, more than the $54 billion it transfers to provinces for health care. By 2030, annual interest costs are expected to hit $76.1 billion, a 37 per cent increase.
The government is categorizing much of its new spending as capital spending rather than operational costs, a new approach the MEI says does not change the total amount of debt. Major commitments include the $13-billion Build Canada Homes program.
The MEI says the budget signals a shift toward greater central planning, with politicians playing a larger role in directing economic activity. It welcomed plans to cut 16,000 federal public service positions by 2028-29 through attrition but argued the government should go further.
There are also signs Ottawa may soften its planned emissions cap on oil and gas. The Parliamentary Budget Officer has estimated the cap could reduce economic output by $20.5 billion and lead to 40,300 fewer jobs by 2032.
Faubert said the government’s expansion of capital cost allowances to help businesses invest is a positive move, but the overall budget still leaves future generations carrying the burden. “Carney calls it a generational budget, and he is right, but only because future generations will be stuck footing the bill,” she said.
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