IMF Chief Highlights Canada’s Strong Fiscal Position Amid Rising Deficit
During the IMF’s annual meeting in Washington, IMF Managing Director Kristalina Georgieva commended Canada for its robust fiscal standing compared to other G7 nations, despite the projected increase in deficit by the Liberal government this year. Georgieva emphasized the importance of leveraging Canada’s fiscal flexibility to stimulate growth in sectors like housing, infrastructure, and energy, which are key areas for enhancing productivity.
The IMF’s recent report forecasted a global growth slowdown in the coming years, citing factors such as prolonged uncertainty, protectionism, and potential financial market corrections that could hamper economic stability. Canada, impacted by U.S. tariffs, is expected to experience a growth slowdown to 1.2% this year. The upcoming budget, scheduled for November 4 under Prime Minister Mark Carney, aims to prioritize nation-building projects and meet NATO defense spending targets.
While the Parliamentary Budget Officer (PBO) projected an increased annual deficit for Canada, interim PBO Jason Jacques expressed concerns about the country’s fiscal sustainability, prompting mixed reactions. Former PBO Kevin Page disputed Jacques’s assessment, asserting that Canada’s fiscal position remains relatively strong within the G7. Page argued that the deficit increase is reasonable given economic conditions and national commitments.
The Liberal government recently announced a shift in budget presentation to the fall, separating operational expenses from capital investments to achieve a balanced budget within three years. Despite some criticisms of the broad definition of capital investment by Finance Canada, the IMF’s Georgieva welcomed the new budgetary framework, noting its alignment with sound fiscal practices.