© Reuters. FILE PHOTO: Canada's Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland walk holding the 2023-24 budget, on Parliament Hill in Ottawa, Ontario, Canada, March 28, 2023. REUTERS/Patrick Doyle/File Photo
However, debt servicing costs are nearing a critical 10% of revenue - a ceiling some economists say is needed in order not to burden future generations or risk cutting government programs. Those debt payments are likely to rise further after bond yields soared globally in recent weeks, they say. "Canada's economic plan is sound, sustainable, and fiscally responsible," said Katherine Cuplinskas, a spokesperson for the ministry.
"It's going to be easier to get inflation down if monetary and fiscal policy are rowing in the same direction," Macklem said.The Trudeau government says it keeps its fiscal outlook anchored by putting the debt-to-GDP ratio on a downward path in the medium-term. There is scant room for additional expenditure if they want to meet this goal, especially since the economy appears to be in a shallow recession already, analysts say.
"They're quickly chewing through any fiscal space that they have," Desjardins economist Randall Bartlett said. He had estimated the government could spend about C$13 billion each year and keep the debt-to-GDP ratio from rising, but that was before the summer.High T-bill issuance in recent months is another possible sign of weaker-than-expected government finances, said Simon Deeley, director of Canada rates strategy at RBC Dominion Securities Inc.
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