The federal deficit totalled $25.5-billion over the first 11 months of the fiscal year, the Department of Finance said Friday, indicating a smaller deficit than Ottawa projected in November.
Finance Minister François-Philippe Champagne’s fall budget had projected a deficit of $78.3-billion for the 2025-26 fiscal year.
The minister will release a spring economic statement Tuesday.
The government typically posts large one-month deficits in March, the final month of the fiscal year.
For instance, last March, Ottawa posted a $23.9-billion deficit. However, even a repeat of a deficit of that size for this March would mean Ottawa is well within its budgeted deficit forecast.
Ahead of the spring economic statement, some private-sector economists have said they expect Ottawa will show an improved bottom line compared to what was expected at the time of the budget. The question they raise is whether the Liberals will use that room for new spending.
Rebekah Young, Scotiabank’s vice-president of economic policy, who authored a detailed analysis of federal finances earlier this week, said in an interview Friday that while federal revenues are higher than projected in November, she expects new and recent spending announcements will use up most of that room.
“They’ll land closer to $78-billion than they will to the $25-billion,” Ms. Young said regarding her expectations for the deficit figure Mr. Champagne will announce Tuesday. “I suspect March had a bit of March Madness and stuff went out the door.”
C.D. Howe Institute urges Ottawa to curb deficit spending in upcoming fiscal update
While the underlying economic numbers have improved since November, Ms. Young said she expects the government will want to be cautious in its forecasting in light of the negotiations taking place over Canada-U.S. trade and the conflict in the Middle East.
“There’s so much uncertainty that I suspect they will be careful about booking too much of a fiscal windfall,” she said.
RBC assistant chief economist Cynthia Leach released a similar analysis in a report Friday.
She wrote that while the federal deficit “is tracking well below budget,” higher rates of spending for the final months of the fiscal year should mean that the updated bottom line lands “closer to budget numbers.”
Some of the major new spending announced since the November budget include January’s announcement of a temporary increase to the GST credit, estimated to cost $12.4-billion over six years, and a $2.4-billion announcement earlier this month to shave 10 cents per litre on regular gasoline – and four cents per litre on diesel fuel – for a little more than four months.
The final, official figure for the size of an annual deficit is not typically confirmed until the fall, when Ottawa releases its public accounts.
The department’s fiscal monitor report, released Friday, showed Ottawa ran a surplus of $5.7-billion in February, compared to a surplus of $7.6-billion in February, 2025.
The Nov. 4, 2025, budget projected the size of the federal deficit would decline each year through to the end of the decade.
It also pledged to maintain a declining deficit-to-GDP ratio. The budget aimed to lower that ratio to 1.5 per cent in 2029-30 from 2.5 per cent of GDP in 2025-26.
This was stated in the budget as one of the government’s two “fiscal anchors.” However the levels mark a break from a previous fiscal anchor, declared in the 2024 economic statement, “to keep the deficit under 1 per cent of GDP in 2026-27 and future years.”
In a report, the University of Ottawa’s Institute of Fiscal Studies and Democracy said Canadians want the update to signal a shift from promises to action.
“They need to see shovels in the ground. They need to see public service leadership deliver on the government’s commitments,” said the institute, which is led by former parliamentary budget officer Kevin Page.
The report said the spring update shouldn’t be judged by a single deficit number or headline promise.
“In the end, the fiscal update will be judged less on what is announced and the top-line deficit numbers and more on whether the government’s plan is coherent, credible, and capable of being delivered in the context of today’s volatile, fast-changing world,” it said.