OTTAWA — Prime Minister Mark Carney has introduced his first budget, which he describes as ambitious but costly. The Liberal government’s budget, released on Tuesday after several months of delays, projects a deficit of $78.3 billion for the fiscal year 2025-26. This figure marks the third highest deficit in Canadian history and the largest recorded in a non-pandemic year. The projected deficit aligns with recent non-government estimates.

The budget also includes new forecasts indicating slight reductions in Canada’s annual deficits over the next four years. However, it anticipates an additional $320 billion in debt will be added to the national balance sheet by the end of the decade. Finance Minister François-Philippe Champagne characterized this budget as a “generational investment” aimed at revitalizing Canada’s economy.

Champagne stated that the deficit forecasts are “in the range people expected.” A significant portion of this year’s deficit, along with anticipated future deficits, is attributed to government initiatives aimed at strengthening the economy and increasing exports beyond the United States. These initiatives are designed to attract at least $500 billion in private investment over the next five years. They include investments in infrastructure and housing, funding for skills training for those affected by trade issues, defense spending, and tax cuts for individuals.

The budget also reflects broader economic challenges, including a slowing global economy, weak productivity, and ongoing trade tensions with the United States and China. As a result, the Canadian economy is projected to experience only marginal growth, with gross domestic product (GDP) growth expected to be just above 1 percent this year and next. This is a decrease from the 2 percent growth forecasted in last year’s Fall Economic Statement.

The new economic conditions have led to a reduction of $7 billion annually in federal revenue compared to previous estimates. Consequently, Canada’s total debt has reached $1.27 trillion, with nearly half of that amount accumulated in the last five years. The federal government is on track to incur $593.1 billion in debt over the past five years, which accounts for 46.7 percent of the total debt in Canadian history. A significant portion of this debt, approximately $327.7 billion, originated from the fiscal year 2020-21, coinciding with the onset of the pandemic and subsequent government policies.

Interest payments on Canada’s debt are projected to cost taxpayers about $53.4 billion this year, with expectations that this figure will rise to $76.1 billion by the end of the decade as the national debt is anticipated to increase by approximately 25 percent during that time.

The Conservative Party has intensified its criticism of government deficits, linking them to rising inflation. During Monday’s Question Period, opposition members emphasized that Canadians are seeking “an affordable budget for an affordable life.” While many economists express concern over Canada’s fiscal outlook, there is also acknowledgment of the government’s focus on investments that could yield long-term economic benefits.

In recent weeks, the government has sought to prepare Canadians for the challenging fiscal news and mitigate potential political repercussions. In a pre-budget address at the University of Ottawa last month, Carney remarked that U.S. tariffs have placed Canada in a difficult position, emphasizing the need for decisive action to foster a stronger economy in the long run. He stated, “Now is not the time to be cautious because fortune favours the bold.”