Canada posts C$26.39 billion fiscal deficit through first eight months of 2025/26 as spending outpaces revenues

Canada's finance ministry reported a C$26.39 billion budget shortfall for the first eight months of the 2025/26 fiscal year as program spending rose faster than revenues. Year-to-date revenues increased 1.9% while program expenses grew 3.1%; public debt charges edged up 0.3% due to offsetting movements in short-term and longer-term interest rates. On a monthly basis, November recorded an C$8.02 billion deficit, slightly narrower than the C$8.21 billion shortfall in November 2024.

Key Points

Canada recorded a C$26.39 billion budget deficit for the first eight months of the 2025/26 fiscal year, up from C$22.72 billion in the same period a year earlier.
Program expenses rose 3.1% with increases across all major spending categories, while year-to-date revenues grew 1.9% driven by higher customs import duties and corporate and personal income tax receipts.
Public debt charges edged up 0.3%, reflecting offsetting effects of lower short-term interest rates on treasury bills and higher rates on the stock of marketable bonds; November's monthly deficit was C$8.02 billion versus C$8.21 billion a year earlier.

Canada recorded a budget deficit of C$26.39 billion for the first eight months of the 2025/26 fiscal year as government expenditures grew faster than revenues, the finance ministry said on Friday.

The cumulative shortfall compares with a C$22.72 billion deficit for the same period a year earlier. The increase in the year-to-date deficit reflects a combination of higher program spending and more modest revenue gains.

Spending and debt costs

Program expenses rose 3.1% over the period, with increases reported across all major categories of government spending. Public debt charges were marginally higher, up 0.3%, a change the ministry attributed to offsetting effects: lower short-term interest rates on treasury bills alongside higher rates on the stock of marketable bonds.

Revenue developments

Year-to-date revenues grew by 1.9%. The ministry said this uptick largely reflected higher income from customs import duties and stronger receipts from corporate and personal income taxes.

Monthly snapshot

On a monthly basis, Canada posted a deficit of C$8.02 billion in November, marginally narrower than the C$8.21 billion deficit recorded in November 2024.

What this tells markets and policymakers

The numbers point to a fiscal position where program commitments and related spending categories are expanding at a faster clip than revenues. At the same time, mixed movements in interest rates for different debt instruments are producing only small changes in overall public debt charges.

Exchange considerations are reflected in the conversion rate noted alongside the figures: $1 equals 1.3524 Canadian dollars.

Further updates and analysis will depend on subsequent monthly releases and how revenue trends and debt-service costs evolve against the backdrop of spending patterns.

Risks

The budget deficit widened because government expenditures increased faster than revenues, posing continued pressure on public finances - this impacts government borrowing needs and fiscal policy decisions.
Shifts in interest rates produced offsetting effects on debt costs; further volatility in short-term or marketable bond rates could alter public debt charges and affect debt-servicing costs for the government.
If revenue growth remains limited relative to spending increases, there is uncertainty over the pace at which the deficit can be reduced without changes to spending or revenue policy.

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Key Points

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