{"id":327930,"date":"2025-12-05T22:42:10","date_gmt":"2025-12-05T22:42:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/327930\/"},"modified":"2025-12-05T22:42:10","modified_gmt":"2025-12-05T22:42:10","slug":"imf-lauds-canadas-fiscal-direction-but-says-guardrails-should-be-strengthened","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/327930\/","title":{"rendered":"IMF lauds Canada\u2019s fiscal direction, but says guardrails should be strengthened"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Ottawa’s 2025 federal budget, tabled in November, showed a $78.3-billion deficit this year, with no path back to balance over the next five years.Sean Kilpatrick\/The Canadian Press<\/p>\n

The International Monetary Fund says that Canada\u2019s fiscal policy is moving in the right direction, but suggested that the federal government should strengthen its budgetary guardrails and push further on regulatory reforms. <\/p>\n

In its annual review of Canadian economic policy, published Friday, the IMF said that the federal government\u2019s emphasis on public investment over operational expenditures in its fall budget is welcome. <\/p>\n

The budget<\/a>, released last month, ramped up spending on the military, housing and transportation infrastructure while booking around $13-billion in annual expenditure reductions on government operations. <\/p>\n

\u201cWe do like the idea that you pivot to more public investment, and then the government is going to embark on a multiyear expenditure review,\u201d Ashvin Ahuja, Canada mission chief at the IMF, said in an interview. \u201cBut proof will be in the pudding. It\u2019s not going to be easy to do this expenditure review. It\u2019s also a delicate task to do it. So it\u2019s early yet, but the direction of travel is correct.\u201d<\/p>\n

Carney earmarks $89.7-billion in new spending to counter U.S. protectionism<\/a><\/p>\n

Federal budget\u2019s fiscal targets unlikely to be met, interim PBO says<\/a><\/p>\n

Ahead of the budget, IMF managing director Kristalina Georgieva lent her support to Prime Minister Mark Carney\u2019s emphasis on deficit-financed investment. Ms. Georgieva said, in comments widely quoted by Liberal ministers, that Canada and Germany were the two countries with the most fiscal head room to work with. <\/p>\n

When the budget was published in early November, it showed a $78.3-billion deficit this year, with no path back to balance over the next five years. Meanwhile, the debt-to-GDP ratio is projected to rise slightly then move sideways over the coming years, rather than decline. The government under former prime minister Justin Trudeau had targeted a declining debt-to-GDP ratio as its fiscal anchor. <\/p>\n

Mr. Ahuja said that despite the higher deficit, Canada, like Germany, remains in a relatively good fiscal position.<\/p>\n

\u201cI think it\u2019s too early to say that debt is not sustainable. Not in our definition, not the way that we assess it,\u201d he said.<\/p>\n

But he also said that Ottawa would be wise to bring back its debt-to-GDP target, alongside the two new targets introduced in the budget: Balancing operational spending with revenues by 2028-29 and maintaining a declining deficit-to-GDP ratio. <\/p>\n

\u201cIt\u2019s been clear in every discussion we have with [the Department of] Finance that it would be a better framework if you have a clear debt-to-GDP anchor, supported by the other two anchors,\u201d Mr. Ahuja said.<\/p>\n

He said that other countries have tended to be more successful in splitting up operational and capital spending in the budget, and focusing on balancing the operational side, if they also have a clearer overall debt-to-GDP anchor. \u201cIt gives you more clarity, more discipline, and also the credibility that your ambitious investment plan is going to pan out,\u201d he said. <\/p>\n

Looking beyond the fiscal track, Mr. Ahuja said the IMF likes what it sees in terms of Ottawa\u2019s attempts to boost private sector investment through changes to research and development grants, increased financial sector competition and changes to business taxation to allow for accelerated depreciation. <\/p>\n

But he said that Canada will need to dig deeper if it wants to address perennially poor productivity growth, which is tied to weak business investment and trouble scaling companies \u2013 issues that have only become more pressing as the United States has moved in a sharply protectionist direction, hammering Canadian trade.<\/p>\n

\u201cI hope you see that the statement recognizes meaningful progress, but we would like to see a push further into regulatory efficiency: Think about predictable project delivery, deeper competition, contestability, innovation pathways, all these commercialization pathways,\u201d Mr. Ahuja said. <\/p>\n

And Canada needs to re-up efforts to lower interprovincial trade barriers and improve the internal market: \u201cThere was momentum early in the year. I\u2019m not so sure if that momentum is there at the moment,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Ottawa’s 2025 federal budget, tabled in November, showed a $78.3-billion deficit this year,…\n","protected":false},"author":2,"featured_media":327931,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-327930","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/327930","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=327930"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/327930\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/327931"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=327930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=327930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=327930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}