Canadian Prime Minister Mark Carney recently pledged to reduce the federal operating deficit to zero by fiscal year 2028-29 by separating government operating expenses from capital expenditures. This move has been met with scepticism, with critics arguing it’s merely an accounting “numbers game” and won’t truly alleviate taxpayer pressure.
The Carney government’s approach to the deficit primarily involved classifying some operating expenses as “capital investments” in its calculations. However, Acting Federal Budget Officer Jason Jacques warned last November that as much as $94 billion in operating expenses in the federal budget were incorrectly classified as revenue-generating capital investments, violating standard accounting principles. If strictly classified according to regulations, this portion of funds should be considered operating expenses, meaning Carney’s promise to balance the deficit may be difficult to fulfill. The actual deficit far exceeded expectations.
This month, current Budget Officer Annette Ryan reported that the Carney government’s cumulative deficit is projected to reach C$318.1 billion over the next five years, C$22.6 billion higher than the C$295.5 billion projected in the spring economic statement 51 days ago. The main reason for this gap is declining government revenue, particularly a reduction in personal income tax. This data once again confirms that the government’s choice to increase debt rather than taxes is not a true “burden reduction,” but merely a postponement of tax pressure to the future. Interest expenses erode public services
A new report from the conservative think tank Fraser Institute uses stark figures to illustrate the true cost of high debt. In 2025-26, the combined debt of the Canadian federal and provincial governments will reach C$2.4 trillion, with interest payments alone amounting to C$94.4 billion.
The annual burden per Canadian resident, allocated by each province, is Newfoundland and Labrador had the highest at $3,348.
Manitoba 2816 Canadian dollars
Quebec $2436
Ontario $2282
British Columbia $2185
New Brunswick: $2141
Nova Scotia 2138 Canadian dollars
Saskatchewan $2133
Prince Edward Island 2078 Canadian Dollars
Alberta has the lowest price at $1845.
This money is only enough to “pay interest,” and not a single penny can be used to repay the principal. Interest expenses squeeze education and healthcare
Interest payments also directly squeeze spending on public services. For example, in 2025-26, the federal government paid $54 billion in debt interest, almost equal to the $54.7 billion in medical transfers allocated to the provinces that year; Ontario taxpayers paid $16 billion in provincial interest, even exceeding the total post-secondary education budget ($14 billion); and Alberta paid $2.9 billion in interest, far exceeding the $1.6 billion budget for child and family services. Jake Fuss of the Fraser Institute points out: “Government debt must pay interest, and the more interest payments there are, the less money is left for the public to access the projects and services they need.”