Mark Carney Unveils Ambitious Fiscal Stimulus to Revive Canadian Economy

Canada’s Prime Minister Mark Carney is set to roll out a sweeping fiscal stimulus in his maiden budget, aiming to transform the nation’s economy and reduce its reliance on the United States. The budget, to be presented by Finance Minister François-Philippe Champagne on Tuesday, promises “generational investments” in housing, defense, and infrastructure to revive growth amid U.S. tariffs and trade tensions. Economists anticipate Canada’s largest deficit outside the pandemic era — projected between C$70 billion and C$90 billion — as Carney seeks to navigate a challenging economic and political landscape.

Carney has pledged to boost defense spending to 2% of GDP by the end of the fiscal year, rising to 3.5% by 2035, representing nearly C$150 billion in annual investments. However, with limited new revenue sources after scrapping retaliatory tariffs and the Digital Services Tax to ease U.S. tensions, experts warn of mounting fiscal strain. Public debt charges, already up 125% since before the pandemic, are expected to rise further, prompting concerns over sustainability. The government is now requiring ministries to identify up to 15% in savings by 2028 to offset spending pressures.

Despite fiscal challenges, the budget marks a strategic shift toward long-term growth, emphasizing housing, infrastructure, and climate initiatives as key drivers of recovery. For the first time, Ottawa will differentiate between operational and capital spending, introduce a three-year plan to balance the operating deficit, and project a declining debt-to-GDP ratio. “We will be ambitious with our investments and rigorous with our expenses,” Champagne said, calling the budget a “necessary pivot” for Canada’s economic resilience.

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