What to Expect From Tuesday’s Federal Fiscal Update

News Analysis

The Carney government will provide an update on the country’s fiscal situation this week, half a year after it projected a record deficit in its first budget.

Finance Minister François-Philippe Champagne will table the Spring Economic Update on April 28, a day before the Bank of Canada’s policy rate announcement.

Both the federal government and the central bank have been navigating a complicated domestic and global environment, marked by low domestic productivity, U.S. tariff actions, and the energy shock caused by the war in Iran.

Still, Prime Minister Mark Carney said on April 27 Canadians can expect some “good news” regarding the country’s fiscal situation, citing his progress on meeting deficit targets and getting spending “under control.”

“This has been core to our strategy, which is to spend less, get spending under control, so that Canada can invest more,” Carney said in Ottawa on April 27, when announcing the creation of Canada’s first sovereign wealth fund, dubbed the Canada Strong Fund.

Few details have been released about the project, including how Ottawa will fund its initial contribution of $25 billion. Champagne, during a separate announcement in Montreal on the new fund, suggested the money would be borrowed on the international market.

Carney and Champagne said more information will be provided in this week’s Spring Economic Update. The Canada Strong Fund will join a number of other federal investment entities, including the Canada Infrastructure Bank and the Canada Growth Fund.

Deficit Figure

It’s still unclear how the Carney government’s strategy of belt-tightening while increasing investments has impacted the debt and deficit. However, recently released data suggest the deficit hasn’t expanded as much as projected this fiscal year.

Last week, the department of finance released its Fiscal Monitor for February 2026, which indicates a federal government budget deficit of $25.5 billion for the period of April 2025 to February 2026.

The figure doesn’t include data for March, when the government typically posts a larger monthly deficit. The figure last March was $23.9 billion.

Even if Ottawa were to post a $40 billion deficit in March 2026, the total deficit for this fiscal year would come in at around $64 billion, which is much lower than the projections of Budget 2025.

Carney’s first budget, released last November, had projected a deficit of $78.3 billion for fiscal 2025-26, the highest outside the COVID-19 era.

In comparison, the last fiscal update of the Trudeau government in the fall of 2024 projected a deficit of $42.2 billion for fiscal 2025-26, and $31 billion for the current fiscal year.

Better deficit figures could mean the Carney government will increase spending within the fiscal headroom, according to Rebekah Young, vice-president of economic policy at Scotiabank.

“With a slim majority now in hand, the government is well positioned to further advance its agenda,” Young wrote in an April 23 note on the upcoming spring fiscal update. “While a fuller mandate reset is more likely in the Fall budget, this update should sustain momentum, using any near-term fiscal tailwinds to reinforce investment plans without straying far from November’s fiscal path.”

In recent days, the Liberal government has touted Canada’s economic strength amid turbulence, citing International Monetary Fund (IMF) data showing the country has the second-highest GDP growth in the G7, behind only the United States.

Champagne noted again on April 27 how the IMF views Canada’s fiscal position as being the strongest in the G7.

Opposition Requests

This positive view of the economy has been challenged in recent weeks by the Conservatives, who say that Canadians are not feeling an improvement in their lives due to the persistently high cost of living.

Tory Leader Pierre Poilievre sent an open letter to Carney on April 26, outlining his party’s expectations for the spring fiscal update.

Poilievre called on Carney to cap this year’s deficit at the $31 billion level set by former Prime Minister Justin Trudeau in 2024, and to outline a medium-term plan for a balanced budget.

“You have given Canada the worst household debt, the worst food inflation, the worst housing costs and the second-worst unemployment in the G7,” he said. “Your record is more cost, more debt, more taxes and more of the same.”

The Bloc Québécois also outlined a long list of demands for Ottawa last week, including the implementation of a federal wage subsidy to support businesses impacted by U.S. tariffs. The Bloc is also calling for employment insurance reform, increased health transfers to the provinces, and more support for the media and the arts.

The requests from the opposition parties come shortly after the Liberals secured a majority government through floor-crossings and recent byelection wins. The Liberals have 174 seats and the opposition has 169 seats, so any vote on new fiscal measures presented in the Spring Economic Update is sure to pass.

Bloc Leader Yves-François Blanchet said the Liberal majority is no reason to avoid stating expectations.

“We must not believe that because the Liberals have a slim majority in the House that nobody else has anything to say. I don’t believe that,” he said.

Other groups outside Parliament have also made recommendations to the Carney government ahead of the spring mini-budget.

The economics think tank C.D. Howe in a report released last week called on Ottawa to embark on a path to return to balanced budgets, saying that deficit spending has negatively impacted economic growth and living standards.