MNI BRIEF:Canada Budget Nearly Balances Itself On CPI Gain-PBO

Canada's federal budget will nearly balance itself over the next four years as inflation boosts revenue and if the government refrains from new spending or tax cuts, the Parliamentary Budget Officer reported Thursday.

The report will likely spark more political friction around whether Liberal Finance Minister Chrystia Freeland follows the advice of the IMF and Conservatives to avoid spending that worsens inflation and forces the central bank into harsher rate hikes.

The deficit will narrow to 0.1% of GDP or CAD3.4 billion in the 2026-27 fiscal year from a shortfall equal to 3.9% of GDP last year, the PBO said. Freeland's last budget saw a deficit of around CAD7 billion for that year. Canada must quickly end fiscal and monetary stimulus introduced in the pandemic, a former top cabinet adviser says. (See: MNI: Canada Should End Stimulus Symmetrically- Ex Cabinet Czar)