Parliamentary Budget Officer Yves Giroux prepares to appear before a committee in Ottawa, on June 13, 2022. The parliamentary budget officer says higher interest rates will lead the economy to stagnate in the second half of the year, while the federal deficit will rise significantly this fiscal year.The federal government has announced $28.6-billion in new spending since the March 2023 budget, according to a report by Parliamentary Budget Officer Yves Giroux.
Mr. Giroux singled out the increase in light of the fact that Finance Minister Chrystia Freeland has said a declining debt-to-GDP ratio is the government’s “fiscal anchor,” or guiding principle for managing federal finances. Friday’s PBO report shows that annual federal deficits over 2022-2023 to 2027-2028 will be about $4-billion larger on average than what the PBO had estimated in its March report. The PBO’s numbers are broadly in line, however, with the government’s March budget forecast.
Economists at Desjardins have said higher interest rates could add about $5-billion a year to the federal deficit. The PBO report shows spending on public debt charges will jump to $46.4-billion this year from $34.8-billion the year before. That forecast for the current year is $2.5-billion higher than the government estimated in the budget.