GOLDSTEIN: Federal deficits to be higher next five years than Carney Liberals predicted

The Parliamentary Budget Officer projects federal deficits will average $4.6 billion higher annually than the Carney government's April projections

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Published Jun 04, 2026  •  Last updated 4 minutes ago  •  3 minute read

Prime Minister Mark Carney takes part in a press conference on Parliament Hill in Ottawa April 14, 2026. Photo by Blair Gable/Postmedia

A new report by the Parliamentary Budget Officer says Prime Minister Mark Carney can define his annual federal deficits any way he likes, but the fact is they’re going to be higher for the next five years than the Liberals predicted in their spring mini-budget just 37 days ago.

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PBO Annette Ryan, in her economic and fiscal update for June, estimates last year’s deficit will be $72 billion (2.2% of GDP) when the final numbers come in for the 2025-26 fiscal year (April 1 2025 to March 31 2026).

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That’s double the $36.3 billion deficit (1.2% of GDP) the Liberals reported in 2024-2025 and $5.1 billion higher than the $66.9 billion deficit Finance Minister Francois-Philippe Champagne projected on April 28, the PBO reports, “as modest revenue growth is outpaced by growth in expenses – largely reflecting the introduction of new measures.”

For the next five years, the PBO projects, federal deficits will average $4.6 billion higher annually than the government’s April projections, “reflecting lower revenues, particularly personal income tax, and higher program expenses, partially offset by lower public debt charges.”

The PBO says this year’s federal deficit (2026-2027) will come in at $71.8 billion, compared to the government’s spring projection of $65.3 billion; $68 billion for 2027-2028 compared to $63.1 billion; $60.4 billion for 2028-29, compared to $57.7 billion; $59.7 billion for 2029-30 compared $56.2 billion; and $58.2 billion in 2030-31 compared to $53.2 billion.

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Carney promising to balance operating deficit by 2028-29

Carney has announced he is separating the operational costs of the government from capital spending and has promised to balance the operating deficit by 2028-29.

But Ryan’s predecessor, interim parliamentary budget officer Jason Jacques, warned last November that the Carney government misclassified $94 billion worth of operating expenses in its November budget as revenue-generating capital investments, contrary to standard accounting practices.

If that $94 billion was properly reclassified as government operating expenses, Jacques said, the Prime Minister will fail to achieve his promise to balance the government’s operating budget by 2028-29.

Ryan said that in order to support greater transparency, she plans to do an independent assessment of Carney’s capital budgeting framework in an upcoming report.

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“Due to persistent budgetary deficits of on average 1.8% of GDP over the projection horizon,” Ryan wrote, “the federal debt-to-GDP ratio (the lower the number the better) is anticipated to increase from 41.3% in 2025-26 to 42.5% in 2030-31.”

Noting that the International Monetary Fund recently urged the federal government to reinstate the debt-to-GDP ratio as its primary fiscal anchor to “strengthen discipline, transparency, and credibility,” Ryan said based on the calculations in her report, there is only a 39.6% chance the federal debt-to-GDP ratio in 2030-31 will be lower than its 2025-26 level.

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Interest on federal debt will be $58.9 billion this year

According to the PBO, the cost of paying interest on the total federal debt of $1.41 trillion this year will be $58.9 billion – more than the $57.4 billion the federal government will transfer to the provinces for health care.

By 2030-31, the cost of servicing the projected $1.66 trillion federal debt, the PBO report says, will be $80.2 billion, money that doesn’t go to better public services or lower taxes. It doesn’t even lower the debt, because it only covers the cost of the interest on it.

Ryan also projects that due to continuing trade uncertainty with the U.S., Canada’s real GDP growth will be 1.1% this year – down from 1.7% in 2025 – and 1.6% in 2027, down from an earlier prediction of 1.8%.

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