OTTAWA — Ottawa's Parliamentary Budget Officer (PBO) has indicated a low likelihood that the Carney government will meet its fiscal targets, just months after they were established. Jason Jacques, the interim PBO, informed a parliamentary committee on Thursday that there is only a 7.5 percent chance the government will achieve its goal of reducing the deficit-to-gross domestic product (GDP) ratio in the coming years.

"Based on the analysis we’ve conducted, there is a low probability of respecting the fiscal anchors the government has set out for itself," Jacques stated during a session with the House of Commons’ Government Operations and Estimates Committee, responding to a question from Conservative MP Philip Lawrence.

The Carney government had set three fiscal targets: balancing the operating budget within three years, reducing the deficit-to-GDP ratio, and decreasing the debt-to-GDP ratio over the next few years. However, the government’s first budget, released earlier this year, eliminated the third target.

John Fragos, a spokesperson for Finance Minister François-Philippe Champagne, explained that the government plans to cut operational spending, including in the public service, while increasing investments in growth areas such as energy infrastructure, artificial intelligence, and critical minerals. "The government’s fiscal anchors reflect the balance between fiscal prudence and the macroeconomic reality," Fragos said.

Jacques has been critical of the Carney government’s fiscal policies since taking office. He described the government’s spending as "stupefying," "shocking," and "unsustainable." In a recent report, the PBO criticized the federal government for using an "overly expansive" definition of investments that would help meet its first fiscal target. This approach, according to the PBO, shifts approximately $94 billion in daily spending over the next five years to the capital side of the budget, which is generally viewed more favorably.

Capital spending typically includes physical assets like infrastructure, housing, and military equipment. Some of this spending, such as on transportation routes, can enhance productivity and economic growth. However, Jacques argued that items like corporate income tax expenditures, investment tax credits, and operating subsidies should not be classified as capital spending. "The government’s definition of capital investment is too broad," he stated.

The Carney government’s first budget also marked a significant change by separating capital and operational spending for the first time. While some defend this accounting method, critics warn it may lead to increased overall spending.

The budget projected an average deficit of $64.3 billion from this fiscal year through 2029-30, more than double the previous year's projections. It also forecast a deficit of $78.3 billion for this year, which ranks as the third-highest in Canadian history and the largest in a non-pandemic year. The government anticipates modest reductions in the annual deficit over the next four years, but this will still result in an additional $320 million in new debt by the end of the decade.

Currently, the federal government’s debt stands at $1.27 trillion, with nearly half of that amount accumulated in the last five years. The updated budget forecast indicates that Ottawa is on track to incur $593.1 billion in debt over the next five years, accounting for 46.7 percent of the total debt accumulated.