A group of Canadian financial market experts is warning Finance Minister François-Philippe Champagne that Ottawa must restore its fiscal credibility, arguing the federal government lacks a credible plan to rein in deficits or stabilize the national debt.Blacklock's Reporter says in a pre-budget submission to the House of Commons finance committee, the Canadian Forum for Financial Markets called on the federal government to re-establish the debt-to-GDP ratio as its primary fiscal anchor and set out a clear path toward pre-pandemic debt levels."Restore fiscal credibility," the organization wrote. "Re-establish the debt-to-GDP ratio as the fiscal anchor with a clear, medium-term path back to pre-pandemic levels."Before the COVID-19 pandemic, Canada's federal debt-to-GDP ratio stood at about 30%. It has since climbed to approximately 41% and is projected by the Parliamentary Budget Officer to exceed 42% next year.The forum said Ottawa has yet to present a roadmap for balancing the budget after years of deficit spending."The federal debt is projected to rise from $1.27 trillion to $1.63 trillion over the same period while the debt-to-GDP ratio increases," the submission states.Canada has not recorded a balanced federal budget since 2007.The recommendation echoes commitments made by former finance minister Chrystia Freeland, who said in 2022 that the debt-to-GDP ratio would serve as the government's fiscal anchor."This is our fiscal anchor, a line we will not cross," Freeland said at the time. "We will review and reduce government spending because that is the responsible thing to do."Warnings about Ottawa's fiscal trajectory have also come from the Parliamentary Budget Officer..Appearing before the House of Commons government operations committee last September, interim Parliamentary Budget Officer Jason Jacques said Canada's fiscal path had become unsustainable."You know something is going to break," Jacques told MPs."It should be very alarming," he added. "We don't lightly use the word 'unsustainable.' Unsustainable means you don't have the option of saying, 'Maybe I'll wait a couple of years, I'll see how things go.' It means if you don't change, this is done."In his April 28 spring economic update, Champagne said the government had reduced its projected 2025 deficit by $11.5 billion and told Parliament that deficits would continue to decline over the coming years.However, a Parliamentary Budget Officer report released June 4 reached a different conclusion."We project the deficit to increase markedly," the report states.While Champagne forecast a 2025 deficit of $65.4 billion, the budget office estimated the actual deficit will reach $71.8 billion.The report also cast doubt on the government's ability to achieve its own fiscal targets.Using historical economic trends and stress testing, budget office analysts concluded there is less than a 1% chance that Ottawa's deficit-to-GDP ratio will decline every year through 2031 as the government projects.
