OTTAWA (Reuters) – Canada’s budget deficit is forecast to hit a historic C$381.6 billion ($293.9 billion) on COVID-19 emergency aid, with the federal government eyeing C$100 billion in stimulus to be rolled out once the virus is under control, the finance department said on Monday.

Canada’s Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks to news media before unveiling her first fiscal update, the Fall Economic Statement 2020, in Ottawa, Ontario, Canada November 30, 2020. REUTERS/Blair Gable

The forecast deficit is 11.2% higher than projected in July, mostly due to C$25.1 billion in new COVID-19 and recovery spending, along with higher emergency support costs. Total federal debt is now set to top C$1.12 trillion this year.

“We are living through a very virulent second wave of the coronavirus and I think we all know winter will be difficult,” Finance Minister Chrystia Freeland told reporters.

“We have a plan to get through the winter, we have a plan to provide vaccines to Canadians, and we have a plan to build our economy back.”

Canada has spent C$1 billion on vaccine agreements to secure 429 million doses from seven candidates, the document showed. It has spent C$322 billion on direct COVID-19 supports so far.

Once the virus is under control, Freeland said the Liberal-led government will invest up to C$100 billion over three years to “jump-start” the recovery.

The finance department did not include that money in its current fiscal framework, instead giving four scenarios for how it could be rolled out starting in fiscal 2021-22.

“Make no mistake: We commit to providing fiscal support until the economy is firmly back on track,” the government said.

The measures will be subject to a confidence vote, which means the Liberal-led minority administration would be toppled if it failed to gain enough support among legislators.

A government source though predicted “I don’t expect any type of electioneering,” given the importance of the measures being announced.


Some of the stimulus includes a C$20 million “down payment” to fund the design and implementation of a national childcare program, along with more direct supports for low- and middle-income families with young children this year. (See Factbox [L8N2IG6YS])

Canada will also spend more than C$3 billion over 10 years to plant two billion trees, and C$2.6 billion over seven years to help people make their homes more energy efficient.

The additional stimulus will end once the economy has recovered, at which point Canada will resume a “prudent and responsible fiscal path,” the finance department said.

It did not outline a fiscal anchor, but promised to do so once “the economy is more stable.”

The federal debt-to-GDP ratio is forecast to hit 50.7% in 2020-21, up from 49.1% forecast seen in July. It will peak at 52.6% in 2021-22, then decline in subsequent years, the document showed.

“To see the debt-to-GDP ratio falling over the medium term is a good sign for investors who were questioning the government’s commitment to a fiscal anchor,” said Royce Mendes, a senior economist at CIBC Capital Markets.

The Canadian dollar was trading nearly unchanged at 1.2987 to the greenback, or 77.00 U.S. cents, having pulled back from an earlier two-year high at 1.2923.

Reporting by Julie Gordon in Ottawa; additional reporting by David Ljunggren, Fergal Smith and Allison Martell; editing by Steve Scherer, Leslie Adler, Jonathan Oatis and Tom Brown


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