SOUNDING ALARM ON A `FISCAL HOLE'

Plan needed to tackle debt, revenue crisis

OTTAWA • Plunging revenues and unsustainable large deficits will leave Canadian governments in a deep fiscal hole for years to come, a new report says, underscoring the need for provincial and federal leaders to considerably alter their fiscal plans.

The Conference Board of Canada is warning about the “inescapable” ramifications of record-high debts amassed during the COVID-19 pandemic, particularly as a slow economic recovery threatens to crimp government revenues for years.

Concerns over Canada’s fiscal stability, laid out in the new report Challenges Ahead: Canada’s Post Pandemic Fiscal Prospects, is the latest alarm raised by experts, who say finance officials need to introduce major course corrections in their fiscal plans in order to avoid catastrophe down the road.

Governments, consumed by the immediate crisis, have not yet reckoned with the mountains of new debts they have assumed and how they will make up the shortfall, said Pedro Antunes, chief economist at the Conference Board and author of the report.

“Many provinces and territories, and the federal government, are going to have trouble reining in their big deficits in the near term,” Antunes said. “And when you look longer term, the situation is one where it’s essentially untenable.”

The International Monetary Fund, in a report earlier this week, said the federal government under Prime Minster Justin Trudeau “needs further justification” for its sizable spending plans, and warned that any additional unnecessary expenditures “could weaken the credibility of the fiscal framework.”