Ottawa should recommit to debt-to-GDP anchor, IMF report says

OTTAWA — A new report by the International Monetary Fund pushes the federal government to recommit to an old fiscal anchor.

The report, released Friday as part of the IMF’s regular review of the Canadian economy, said the federal government’s budget tabled Nov. 4 rightly pivots toward higher public investment as U.S. tariffs and shifting trade ties hamper the economy.

But it also said a clear debt-to-GDP anchor should remain central to Canada’s fiscal framework.

The Liberals replaced a previous anchor of a declining debt-to-GDP ratio earlier this fall with new metrics committing to a declining deficit-to-GDP ratio and a balanced operating budget in three years.

“Elevating the debt ratio from an indicator to a formal anchor—and positioning the deficit and operating-balance paths as complementary instruments — would create a coherent hierarchy, reinforce accountability, and help ensure investment plans remain sustainable and credible,” the report reads.

Interim parliamentary budget officer Jason Jacques raised concerns about the lack of a declining debt-to-GDP anchor in the lead-up to the budget. After the document was tabled, he said the government’s fiscal path is sustainable in the long term, though he questioned Ottawa’s ability to meet its near-term anchors.

The Canadian Press reached out to Finance Minister François-Phillippe Champagne to ask whether Ottawa would consider adopting the IMF’s recommendation.

John Fragos, spokesman for Champagne, did not answer the question directly but noted in a statement that “debt to GDP is stable.” He said both the PBO and IMF consider federal finances to be fiscally sustainable.

“We welcome the IMF’s report, chiefly the international validation that Budget 2025 reinforces the productivity agenda and can translate higher investment into durable gains in living standards,” he said.

The Liberals trumpeted the IMF’s commentary in the lead-up to the tabling of their major fiscal plan in November. A quote from IMF managing director Kristalina Georgieva endorsing Ottawa’s shift to focus on capital and productive investments is on the second page of the budget document.

The IMF also urged Ottawa to establish an independent mechanism to define capital under the government’s new spending framework, echoing a call from Jacques last month.

It said fiscal policy should continue to be measured, counter-cyclical, and flexible.

Friday’s IMF report also said Canada has held up better than expected under the trade shock from U.S. tariffs.

The report said the impact of the trade dispute was mitigated by exemptions under the free trade agreement between Canada, the United States and Mexico, but employment and investment have still weakened.

The organization said lower commodity prices, softer external demand, slowing immigration and tariff uncertainty have added to the drag.

Looking ahead, the IMF said a risky outlook has become more balanced than earlier in the year, but uncertainty is expected to remain high.

This report by The Canadian Press was first published Dec. 5, 2025.

Craig Lord, The Canadian Press