CANADA'S FEDERAL DEBT-TO-GDP RATIO IS PROJECTED AT 41.1% FOR 2025/26 (DOWN FROM 42.4% IN NOVEMBER), 41.5% FOR 2026/27 (VS 43.1%), AND 41.8% FOR 2027/28 (VS 43.3%), BEFORE REMAINING LARGELY STEADY THROUGH 2029/30 …

Canada’s federal debt-to-GDP ratio is projected to decline slightly over the next few years, with estimates showing 41.1% for 2025/26, 41.5% for 2026/27, and 41.8% for 2027/28, compared to prior projections of 42.4%, 43.1%, and 43.3% respectively, according to the Fiscal Sustainability report. The downward revision in debt burden expectations supports improved fiscal credibility, which may ease downward pressure on government bond yields through a modest improvement in rate differential outlook versus G7 peers. This trajectory suggests stable public financing needs, reducing the risk of abrupt fiscal tightening that could weigh on domestic GDP growth. Markets will particularly assess the transmission through long-end Canadian government bond pricing, where lower debt service costs could allow room for monetary policy flexibility. The next key catalyst will be the release of the full federal budget, which will clarify whether these projections are underpinned by sustained revenue gains or expenditure restraint.

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