MNI POLICY: Canada Defers Setting New Borrowing Limit

Canadian Finance Minister Chrystia Freeland has deferred setting a precise higher government borrowing limit that was due this week, saying she will instead introduce other legal changes later to include emergency spending on the pandemic.

"Given the current level of uncertainty with regards to government spending needs, the Minister will provide her recommendation for the higher maximum amount when the related legislation is tabled," she wrote in a report to Parliament. The report mandated every three years under a 2017 law was sent on the due date of Nov. 23 without any advisory to the public or media.

Federal debt was CAD1.13 trillion as of Oct. 31, or CAD33 billion below the cap, according to the report. Freeland is due to deliver an economic update on Nov. 30 that should update the government's fiscal needs.

"We recognize the financial impact of doing what needs to be done – all while knowing that doing less would end up costing more," Freeland spokeswoman Katherine Cuplinskas told MNI. "Canada has a well-deserved international reputation for smart and prudent fiscal management, which will continue to be the approach of our government."

"We are contending with an historic, worldwide economic slowdown – one for which Canada is well-prepared, due to our strong fiscal position, relative to those of our G7 peers," Cuplinskas said.

The government has borrowed CAD286 billion to help tackle the Covid-19 pandemic, which Parliament has allowed the government to exclude when calculating the limit.

"To promote transparency and accountability, the government will propose amendments to include this amount in the calculation against the new maximum borrowing amount," the report said. It did not give a timeframe for introducing the amendments.

Representatives from the opposition Conservative and NDP parties didn't immediately return with comments after requests about the report.

Conservative lawmakers asked Bank of Canada Governor Tiff Macklem at a hearing late Thursday about whether his plan to buy at least CAD4 billion a week of bonds amounts to financing government deficits. Macklem said that's not the case: the government still must sell new debt in financial markets while lower yields help all Canadians including firms that could hire back people still left unemployed by the pandemic.