Canada’s Deficit Hits $61.9B as Spending and Debt Spiral
The federal government’s Fall Economic Statement reveals a $62 billion deficit for 2023-24—exceeding its promised ceiling of $40 billion by nearly 54 percent, further raising concerns about Canada’s fiscal direction amid mounting global uncertainty and domestic political disarray.
The release was overshadowed by Finance Minister Chrystia Freeland’s abrupt resignation from Prime Minister Justin Trudeau’s cabinet, which came just minutes before the statement’s scheduled briefing. Her departure highlights growing divisions within the government.
The government attributes the deficit’s growth to $16.4 billion in costs related to indigenous claims and $4.7 billion tied to COVID-19-related expenses. The debt-to-GDP ratio sits at 42.1 percent for this fiscal year and is projected to dip marginally to 41.9 percent next year. While this technically fulfills the government’s promise of a declining ratio, the slight decline underscores just how fragile Canada’s fiscal position has become.
Economists have criticized the update’s projections as overly optimistic. They rely on September economic forecasts, which fail to account for Trump’s tariff threats. Such steep tariffs on Canadian imports could devastate Canada’s trade-dependent economy. In response, the government has pledged $1.3 billion over six years for border security, targeting agencies like the Canada Border Services Agency and the RCMP. However, the update lacks specifics on how the funds will be allocated, prompting skepticism about its effectiveness.
Opposition parties seized on the ballooning deficit and Freeland’s resignation as evidence of fiscal mismanagement. Conservative Leader Pierre Poilievre called the shortfall a failure of leadership.
Despite the political turmoil, the statement highlights $17.4 billion to extend investment tax incentives and $1.1 billion for the SR&ED tax program, aimed at boosting innovation and productivity. While these measures signal a pivot toward investment-driven spending, they come with a cost. Economists warn that funding these initiatives through more borrowing only deepens Canada’s debt burden, raising questions about the government’s priorities and fiscal discipline.
Freeland’s resignation has deepened doubts about the government’s ability to address fiscal and economic challenges for some Canadians, but her departure is hardly an exoneration. As finance minister since 2020, Freeland was a key architect of the very policies that led to the $61.9 billion deficit and rising debt levels. Her sudden criticism of “costly political gimmicks” and calls for fiscal prudence is difficult to square with her role in overseeing years of unchecked spending.
Rather than stabilizing the situation, her resignation has further weakened confidence in the government’s economic direction. The Trudeau government now faces mounting pressure to restore credibility, with no clear strategy to counter Trump’s tariff threats or rein in a soaring deficit.
