Parliamentary Budget Officer Annette Ryan appears at a committee meeting in March, 2026, in Ottawa. Ms. Ryan's office released a report that says the government's deficits will likely be higher than forecast.Adrian Wyld/The Canadian Press
Parliamentary Budget Officer Annette Ryan released a report Thursday that projects larger federal deficits than Ottawa forecasted in its spring update.
The PBO’s June Economic and Fiscal Outlook provides an independent assessment of the state of federal finances.
Finance Minister François-Philippe Champagne released his spring economic update on April 28.
At that time, the government forecasted the size of the deficit would be $66.9-billion in the fiscal year that ended March 31, followed by annual deficits that decline slightly over time, reaching $53.2-billion by 2030-31.
Thursday’s PBO report says the deficit for the 2025-26 fiscal year is likely to come in higher, at $72-billion, or 2.2 per cent of gross domestic product.
The PBO says it expects the size of the deficit will be $4.6-billion higher per year on average over the forecast period.
It attributes this difference to PBO assumptions that personal income tax revenues will be lower than the government expected in April, while program expenses will be higher.
In explaining its figures, the PBO said its outlook assumes the economic effects of tariffs and countermeasures in place as of May, 2026, will persist throughout the projection period.
The PBO also assumes that any new trade agreement with the United States would be less favourable than what is in place, with economic effects roughly equivalent to the current tariffs and countermeasures.
Intergovernmental Affairs Minister Dominic LeBlanc was in Washington earlier this week for trade discussions. He told reporters that he presented “a number of specific proposals” for ending U.S. President Donald Trump’s trade war with Canada.
To date, the Trump administration has kept Canada out of formal U.S.-Mexico-Canada Agreement negotiations, while officially engaging in such discussions with Mexico.
The PBO report shows the size of the federal debt climbing to $1.66-trillion by 2030-31, compared with the government’s spring update estimate of $1.629-trillion.
The federal debt-to-GDP ratio is projected to reach 42.5 per cent by 2030-31, up from 40.7 per cent in 2024-25, according to the PBO.
Previous Liberal budgets under former prime minister Justin Trudeau had pledged to reduce the size of the federal debt-to-GDP ratio over time. Instead, under Prime Minister Mark Carney, the government has adopted two other fiscal anchors: reducing the size of the deficit-to-GDP ratio over time and balancing operating spending with revenues by 2028-29.
The PBO said it plans to release an independent assessment of the government’s second target in a future report.
The office also highlighted in its report that the International Monetary Fund “recently recommended reinstating the debt‑to‑GDP ratio as the primary fiscal anchor for Canada, noting that it would ‘strengthen discipline, transparency and credibility while preserving fiscal space for high‑return investment.’"