Canada’s Parliamentary Budget Officer (PBO) has issued a warning that federal borrowing is outpacing deficit growth, raising concerns about the transparency of Ottawa’s fiscal sustainability. The PBO’s Economic and Fiscal Outlook, released on Tuesday, highlights that while higher oil prices have provided a short-term boost to the government’s finances, new spending commitments have already exceeded this fiscal room. The report projects federal deficits to be $3-billion higher annually over the next four years compared to the previous forecast in June.
The PBO notes that the federal debt is growing twice as fast as the deficit due to increased borrowing for Crown corporations and defence commitments. Under accrual accounting, these loans and capital expenses are recorded as assets rather than liabilities, which the PBO argues obscures the true scale of debt. By 2030-31, the federal debt is expected to reach $1.67-trillion, up from $1.3-trillion in 2025-26, with the debt-to-GDP ratio rising to 42.6 per cent from 41.1 per cent.
Conservative MPs have seized on the PBO’s findings, calling for the government to rein in spending. Conservative deputy leader Melissa Lantsman described the report as “scathing” and urged the Liberals to reverse course. Finance Minister François-Philippe Champagne defended the government’s fiscal record, pointing to Canada’s triple-A credit rating and calling for bipartisan cooperation to strengthen the economy.
The PBO also criticized the government’s fiscal anchors, suggesting that focusing on the debt-to-GDP ratio would provide stronger fiscal discipline. The International Monetary Fund has similarly urged Ottawa to reinstate the debt-to-GDP ratio as its primary fiscal anchor. The report highlights that public debt charges are the fastest-growing federal expense, projected to reach $83-billion by 2030-31, up from $24.5-billion in 2021-22.