Budget delay risks Canada’s credibility: Desjardins

The new federal government’s decision not to table a budget until next fall is putting Canada’s fiscal credibility in doubt, warns a report from Desjardins Group economists.

For the past 50 years, the only other times a Canadian government has skipped a spring budget were due to major emergencies — 9-11 and the pandemic — that pushed the budget earlier or slightly later than the spring.

While the country is in the midst of a seismic shift in one of its most fundamental economic and geopolitical relationships, Desjardins says the lack of fiscal transparency from the new administration is “concerning,” particularly given expectations it will ramp up spending and cut taxes in the face of U.S. trade-driven threats to the economy, which will boost deficits for the years ahead.

These higher deficits will also have uncertain impacts on the federal debt, the report said.

“While deficit forecasts were published in the federal election platforms, debt projections were not. As a result, Canadians have been left guessing what ballooning deficits will mean for outstanding debt, the cost of which will be shouldered by current and future taxpayers,” the report noted.

“The delay in publishing a comprehensive fiscal plan introduces a degree of opacity at a time when global markets are likely to scrutinize sovereign balance sheets,” it said, adding that Canada is risking a sovereign rating downgrade as a result.

“Canada is at a unique moment in its history, when exceptional economic threats from south of the border call for exceptional measures. But along with exceptional measures must come exceptional transparency and accountability,” it said.

Delaying a federal budget until the fall does not deliver the needed transparency into federal finances, the report said.

“The government of Canada’s hard-won fiscal credibility could be at stake as a result,” it concluded.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.