Parliamentary Budget Officer Annette Ryan says the government's plan for a sovereign wealth fund lacks design details, such as its governance structure and risk management framework.Adrian Wyld/The Canadian Press
A report by the new Parliamentary Budget Officer says the government’s spring fiscal update plans for a “concerning” increase in debt payments and lacks clarity on major initiatives – including the ramp-up in defence spending, the launch of a $25-billion wealth fund and the government’s plans to find billions in internal savings.
PBO Annette Ryan released a five-part analysis Monday of the spring update, which was presented last week by Finance Minister François-Philippe Champagne. The update showed Ottawa’s bottom line had improved by about $60-billion over five years since the fall budget, but new spending announcements since then have used up about $54-billion of that amount.
A major new initiative in the update was a plan to launch Canada’s first national sovereign wealth fund, to be called the Canada Strong Fund. Prime Minister Mark Carney said the fund will act as an equity investor to help major Canadian projects move ahead.
In her report, the PBO notes that the announcement lacks design details, such as the fund’s governance structure, investment policy, risk management framework, retail product terms, and accountability mechanisms.
The report points out that international wealth funds are typically funded with surplus funds, not additional debt.
“Establishing a sovereign wealth fund when not in a fiscal surplus would result in a leveraged investment for taxpayers. It is not clear if interest changes on debt issued to finance the fund will be included in the calculation of commercial returns,” the report states.
It also recommends that Parliamentarians seek more information about how the new fund would interact with other federal bodies with similar responsibilities, including the Canada Infrastructure Bank, Export Development Canada, the Business Development Bank of Canada and regional development agencies. Other questions raised in the report include how the fund’s debt obligations would be accounted for in its commercial returns.
The spring update’s overall impact on the federal debt is also raised in Monday’s report.
“The interest burden, measured as public debt charges as a share of revenues, is broadly unchanged compared with Budget 2025, but still showing a concerning upward track,” the report states.
It points out that the government expects it will rise to 13.2 per cent in 2030-31, from 10.6 per cent 2025-26. On a per capita basis, public debt charges are projected to climb to $1,901 in 2030-31, from $1,409 in 2026-27, “reflecting low population growth and a rising debt stock.”
Conservative Leader Pierre Poilievre has criticized the update’s forecast for the federal debt, which he noted at a news conference Sunday is on pace to reach about $1.6-trillion by 2031. This would be about $1-trillion higher than it was in 2015, when the Liberals formed government under former prime minister Justin Trudeau.
When asked Monday about the PBO’s concerns about debt-servicing costs and Mr. Poilievre’s comments, Mr. Champagne said the federal net debt-to-GDP ratio compares favourably with Canada’s international peers. That ratio takes into account assets held by federal pension funds.
“With respect to the sovereign fund, there will be more details to come,” he told reporters in Winnipeg. “But I’m always happy to listen to what the Parliamentary Budget Officer has to say and certainly address her questions and provide more information to Canadians.”
On defence spending, the PBO said the government has yet to provide a year-by-year spending plan that describes how it will meet its pledge to increase spending on defence and defence-related infrastructure to five per cent of GDP by 2035.
“The PBO estimates meeting this commitment would require core defence cash spending to reach $159-billion in 2035–36 alone, adding $63-billion to the federal deficit in that year, which would increase the debt‑to‑GDP ratio by 6.3 percentage points," the report states.
It points out that Ottawa’s history of delivering on major infrastructure projects has been “mixed” and that defence procurement has been particularly challenging.
On housing policy, the PBO said no specific homebuilding targets were provided in the spring economic update, even though improving housing supply and affordability are priorities for Ottawa. It called the lack of targets and metrics “notable” given that homebuilding and population growth have been on the decline since Mr. Carney’s budget was unveiled in early November.
The fall budget had highlighted that the Canada Mortgage and Housing Corp. had said housing starts would need to nearly double between 430,000 and 480,000 a year over the next decade to restore affordability to 2019 levels.
However, new home sales have plummeted across much of the country and developers have warned that the drop in transactions will curtail homebuilding. The six-month trend in housing starts fell 2.9 per cent from February to March, according to CMHC.
The PBO said Ottawa’s new housing agency – Build Canada Homes – could add about 26,000 new housing units over five years, but that would be “insufficient to achieve the previously targeted pace of homebuilding.”
An examination of the government’s temporary suspension of federal excise taxes on gasoline, diesel and aviation fuels points out that the $2.4-billion measure will tend to favour higher-income households.
“Total savings increase with household income, ranging from $59 per household in the lowest quintile to $211 per household in the highest quintile, as higher-income households tend to consume more fuel,” the report says.
The PBO report also looks at the government’s “Comprehensive Expenditure Review,” which the budget said would find about $60-billion in internal savings over five years.
The PBO points out that while the government said in its update that implementation of the spending review is “well underway,” the update “does not provide details on actual savings in 2026-27 by department and agencies, nor any updates on the reduction of full-time equivalents.”
With reports from Temur Durrani in Winnipeg and from Rachelle Younglai in Toronto