Photo: Parliamentary Budget Officer (PBO) Jason Jacques told MPs on Sept. 25 that Ottawa’s current spending and debt trajectory cannot be maintained without significant policy changes. Screenshot

Budget watchdog warns Canada’s fiscal path is ‘unsustainable’ as Carney government pledges billions at home and abroad

Canada’s budget watchdog is warning that the federal government’s finances are on a perilous path, using unusually stark language to describe the country’s fiscal outlook as Prime Minister Mark Carney’s government commits tens of billions of dollars in new spending both domestically and overseas.

Parliamentary Budget Officer (PBO) Jason Jacques told MPs on Sept. 25 that Ottawa’s current spending and debt trajectory cannot be maintained without significant policy changes. Testifying before the House of Commons government operations committee, Jacques said the country’s fiscal position is “unsustainable” — a term he stressed is not used lightly by his office.

“Unsustainable means you don’t have the option of saying, ‘maybe wait a couple of years, I’ll see how things go,’” Jacques said. “It means, if you don’t change, this is done.”

Jacques, who took over as interim PBO earlier this month, also described the outlook as “alarming,” “stupefying” and “shocking.” His comments came as the PBO released its latest economic and fiscal outlook, which projects rising deficits and debt levels in the years ahead.

Since taking office in March, Carney’s government has unveiled more than $33 billion in new spending, with roughly $28.4 billion directed toward domestic priorities and about $4.8 billion committed to foreign assistance and defence support abroad.

At home, Ottawa has pledged more than $9 billion to bolster defence spending in 2025–26, including a push to meet NATO spending targets. A further $420 million has been earmarked to expand Canada’s year-round military presence in the Arctic, while another $6 billion will go toward over-the-horizon radar procurement to strengthen northern security. The government has also announced a $13-billion capitalization for a new federal housing agency, Build Canada Homes, intended to accelerate residential construction and tackle affordability pressures.

On the international stage, the Carney government has pledged $2 billion in new military support for Ukraine and a $2.3-billion loan through the G7’s Extraordinary Revenue Acceleration Loans mechanism. Ottawa has also provided $165 million through the Ukraine Defense Contact Group, $207 million for global nutrition, climate and biodiversity programs announced at the United Nations, and $60 million to support stabilization efforts in Haiti. An additional $47 million has been committed to governance and economic resilience programs in the West Bank and Gaza, bringing total Canadian assistance to the region to more than $400 million.

Observers caution that many of these announcements are multi-year commitments that will be rolled out gradually and remain subject to future legislative approval. Some campaign promises are also folded into these figures, raising the risk of overlap between pledged spending and final expenditures.

The fiscal pressure is expected to grow in the years ahead as the government follows through on its 2025 election platform, which included roughly $129 billion in new measures over four years, ranging from tax reductions to major infrastructure and housing investments. While not all of those promises have yet been enacted, they represent additional strain on the federal balance sheet at a time when Canada’s fiscal sustainability is already under scrutiny.

The PBO’s warning underscores the challenge facing the government as it prepares its next budget: balancing ambitious domestic and global commitments with the need to stabilize public finances before debt levels become unmanageable.