Federal Fiscal Repair Continues
BCBC Commentary on the Federal Spring Economic Update 2026
In November, BCBC said that Budget 2025 was beginning the task of repairing Canada's finances. Today’s fiscal update stays the course. Higher oil prices and stronger than expected economic growth have improved overall revenues, but most of the gain is redirected to new spending. Overall, the projected 2026/27 deficit is $65.3 billion, or 1.9 per cent of GDP, essentially unchanged from Budget 2025.
“Canada’s finances continue on a similar track to Budget 2025. We remain concerned about the lack of a credible fiscal anchor to guide overall spending decisions as federal indebtedness drifts higher over the next three years,” says David Williams, BCBC’s Vice President of Policy.
This update announces a new Crown Corporation, the Canada Strong Fund, which will be seeded by significant additional borrowing that does not directly appear on the government’s balance sheet. The fund is unusual because sovereign wealth funds, like those in Norway, Alaska, and Saudi Arabia, are typically created to save government surpluses from resource revenues and provide a long-term endowment for future generations. Instead, this new fund appears to be an equity financing vehicle for government-preferred capital projects.
“The Canada Strong Fund tries to solve a problem that doesn’t exist. The constraint on major capital projects in Canada has never been finance,” says Jairo Yunis, BCBC’s Director of Policy. “Rather, it has been the time, cost, and uncertainty of the regulatory and permitting environment. The most effective thing Ottawa can do is to improve the conditions under which the private sector is willing and able to invest its own money.”
The federal government has committed to making Canada the strongest economy in the G7 and an energy superpower. Delivering on these ambitions means moving faster on major resource and infrastructure projects, following through on fiscal repair, and creating the conditions for private sector investment to recover after a lost decade of economic activity.
-30-
CONTACT
Braden McMillan
Senior Director, Communications & Public Affairs
Business Council of British Columbia
braden.mcmillan@bcbc.com
www.bcbc.com/media
Highlights from the Spring Economic Update 2026
Deficit trajectory
The 2026/27 deficit is $65.3 billion (1.9% of GDP), essentially unchanged from the $65.4 billion projected in Budget 2025. Looking ahead, revenue improvements are fully offset by new spending of $37.5 billion over six years.
New spending commitments include:
Temporary suspension of the federal fuel excise tax on gasoline and diesel;
Boosted Canada Groceries and Essentials Benefit;
Increases in defence expenditures toward Canada's NATO 5% of GDP pledge by 2035, including core defence and defence-related infrastructure; and
$6 billion new spending over five years on training for skilled trades.
Indebtedness
The federal debt-to-GDP ratio is projected at 41.5% in 2026/27, rising in the near term before stabilising.
Public debt charges are $58.7 billion in 2026/27, rising to $80.9 billion by 2030/31. Canada continues to spend more on federal debt servicing than on the Canada Health Transfer.