Canada’s federal government forecast larger budget deficits and a higher debt-to-GDP ratio over the coming years, even as total borrowing needs are set to ease slightly, according to the Finance Ministry’s fiscal update on Tuesday.
Ottawa now expects a 2025/26 deficit of C$78.3 billion, almost double the C$42.2 billion projected in December,
- and a 2026/27 shortfall of C$65.4 billion, versus C$31 billion previously.
- The deficit is seen narrowing only modestly to C$63.5 billion in 2027/28.
The federal debt-to-GDP ratio is now forecast to rise to 42.4% in 2025/26
- and 43.1% in 2026/27,
- peaking at 43.3% in 2027/28
before stabilising through 2029/30.
Despite the larger fiscal gaps, the government plans to borrow C$594 billion in 2026/27, down from C$614 billion in 2025/26.
Bond issuance is projected at C$298 billion (from C$316 billion).
Treasury bills are seen at C$291 billion, slightly below July’s revised forecast of C$296 billion.
Roughly 75% of total borrowings will be used to refinance maturing debt rather than fund new spending.
The budget outlines C$280 billion in investments over five years targeting infrastructure, defence, housing, and competitiveness measures, offset by C$60 billion in planned savings over the same period.
Public debt charges will rise from C$55.6 billion in 2025/26 to C$60 billion in 2026/27, then C$66.2 billion in 2027/28, underscoring the pressure of higher rates.
Economic growth projections were cut across the board, with real GDP growth now seen at
- 1.1% in 2025 (from 1.7%),
- 1.2% in 2026 (from 2.1%),
- and roughly 2% through 2027–28.
The government reaffirmed its commitment to regular green bond issuance as part of its sustainable financing strategy.
