The Liberal government is unlikely to meet the two fiscal anchors outlined in its latest budget, or to have the declining debt-to-GDP ratio promised in previous budgets, the interim Parliamentary Budget Officer (PBO) says.
A fiscal anchor, often referred to as a fiscal guardrail, is designed to steer decisions related to spending, taxation, and borrowing. But interim PBO Jason Jacques told the parliamentary government operations committee on Nov. 20 that analysis by his office found Ottawa has “a low probability of respecting the fiscal anchors” it has set out for itself.
The report said the Liberal government also had an “overly expansive” definition of capital investments that overstates capital spending by $94 billion over the next five years and would be unable to fulfill its promise of balancing operational spending by 2028–29 if it used a stricter definition similar to that employed by nations such as the United Kingdom.
“For some, there’s a bit of lack of clarity regarding the changes that have occurred to those fiscal anchors since the election campaign,” Jacques said. “But of course, as we and others learned with Budget 2025, the government decided to cut that anchor.”
Liberal MP Vince Gasparro asked if Canada’s debt-to-GDP ratio was sustainable over the long-term and Jacques said that, based on Finance Canada’s numbers, it was. The PBO report said the country’s long-term debt-to-GDP ratio is projected to remain “relatively stable over the next 30 years.” Finance Canada projected the ratio will rise from its initial level of 41.2 percent in 2024–25 to 43.6 percent in 2033–34, but decline to 37.2 percent in 2055–56.
However, Jacques said later in the committee meeting that “when” additional economic shocks occur, the Liberal government will not have as much fiscal room to respond. “Consistent with the [International Monetary Fund] research, the more debt you have and the more debt you’re carrying, the greater the risk to the economy and to your financial management the next time there is a shock,” he said, adding that it would make it harder for the government to borrow money cheaply.
Jacques in September said his office estimated the budget’s projected deficit would be $68.5 billion, adding that Canada’s fiscal trajectory was “unsustainable” and “shocking.” The deficit for 2025 given in the Nov. 4 budget is $78.3 billion.
Jacques, who has applied for the permanent position, was asked by Conservative MP Tamara Jansen if he was “concerned” with this language. He said he was not, adding that the PBO needs to have “discretion” and not share private conversations with parliamentarians, and that his role requires “tact to deal with people from all those different backgrounds and meet them where they are.”
