Canada to channel oil windfall into infrastructure and tax incentives in second budget
Prime Minister Mark Carney's second budget proposes using higher oil revenues to fund infrastructure projects, tax incentives and a modest deficit reduction while keeping fiscal targets unchanged.
Ottawa unveiled a second budget that earmarks most of the recent surge in oil revenue for infrastructure and permanent tax incentives, aiming to boost productivity and keep Canada’s fiscal ratios on target. Finance Minister Francois-Philippe Champagne said the plan includes spending up to C$142.1 billion on projects such as an oil pipeline, electricity generation, a grocery rebate top-up, social-housing incentives and defence over the next five years.
The budget projects the fiscal deficit for 2025-2026 at C$39.3 billion, well below the C$66.9 billion forecast in April, and expects debt to rise to C$1.59 trillion by 2030-2031 while the debt-to-GDP ratio remains roughly flat due to higher growth assumptions.
"This budget is a continuation of the same focus that (was) highlighted earlier," said Helen Lao, executive director of economics at CIBC Capital Markets.
"The government is hitting the right pieces in this budget," said Pedro Antunes, chief economist at Signal 49 Research, adding that rising bond yields could increase debt-servicing costs.
Economists noted the plan does not allocate any of the oil windfall to debt reduction, and warned that the projections rely on a optimistic outlook for continued GDP growth and revenue gains.