Canada’s treasury ‘depleted’ as budget weans COVID spending, eyes uncertainty

Deputy Prime Minister and Finance MinisterChrystia Freeland’s second budget of the pandemic era marks what one expert called an effort to “translate geopolitical risk into economic policy.” “This is a modest budget,” said Sahir Khan, executive vice-president at the University of Ottawa’s Institute for Fiscal Studies and Democracy. “The uncertainty in the economic environment has shaped this.” Read more: Budget 2022 will need ‘alchemy’ to balance cost of living, global risks: expert In broad strokes, Khan said the budget represents a shift from an era marked by large-scale, emergency government spending to a transition period where inflation is — hopefully — a short-term phenomenon amid the turbulence of the current global economic upheaval.

The extent of that uncertainty and volatility is the big question mark hanging over what Khan described as the budget’s relatively “modest” spending commitments.

Freeland acknowledged in the budget that after the almost unprecedented spending of the COVID-19 pandemic’s crisis phase, now is the time to lift the government’s foot off the economic gas pedal. “Fighting COVID and the COVID recession came at a high price,” Freeland wrote in the budget. “The money that rescued Canadians and the Canadian economy—deployed chiefly and rightly by the federal government to the tune of eight of every 10 dollars invested—has depleted our treasury.

Our COVID response came at a significant cost, and our ability to spend is not infinite.” Read more: Federal Budget 2022: Feds eye growth with $31B in new spending Freeland emphasized the need to “review and reduce government spending.” She also stressed that the government’s longstanding fiscal anchor — a declining debt-to-GDP ratio — must