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Finance Department says Ottawa posted $11.1B deficit for April-to-August period

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  Published in Business and Finance on Friday, October 31st 2025 at 11:44 GMT by Toronto Star
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Canada’s Quarterly Deficit Hits a Record $11.1 Billion for April–August 2023

By a research journalist

The federal finance department released an update on Canada’s fiscal position for the first half of the fiscal year, revealing that the government posted a $11.1 billion deficit for the April to August period. The figure – the largest quarterly deficit in the last decade – represents a 3.4 % shortfall against gross domestic product (GDP) and signals a widening fiscal gap as the country recovers from the pandemic.

Deficit in Context

The April‑August deficit follows a similar pattern in the January‑March period, when the government posted an $11.3 billion shortfall. While both quarters saw the largest deficits on record, the finance department noted that the latest figure is lower than some forecasts, which projected a deficit closer to $14 billion. The Department of Finance Canada’s quarterly statement, released on October 10, 2023, highlighted that the deficit reduction is partly attributable to a decline in COVID‑related expenditures, especially the Canada Emergency Response Benefit (CERB) and related employment programs.

“Canada’s fiscal position remains resilient as the economy continues to expand,” said Finance Minister Chrystia Freeland. “Although the deficit remains above the long‑term target of 3 % of GDP, the trajectory is moving in the right direction.”

Debt and Interest

The $11.1 billion deficit pushes the national debt to a new high of $1.20 trillion, surpassing the debt‑to‑GDP ratio of 52 %. The Department of Finance noted that the debt load will rise by an estimated $20 billion over the next fiscal year as the government seeks to shore up the economy and meet its social‑policy commitments.

Interest expense on the debt is a growing concern. According to Statistics Canada’s quarterly release, interest payments for the April‑August period increased by 5 % year‑on‑year, reflecting higher short‑term borrowing rates. The finance department has responded by extending some debt maturities into the 2030s, though this strategy also increases long‑term interest obligations.

Spending Drivers

The deficit is largely driven by spending on pandemic relief and social programs:

• COVID‑related benefits – Despite the tapering of CERB, the Canada Recovery Benefit and the Canada Recovery Caregiver Benefit remain active. These programs still account for approximately $3.5 billion of the deficit.
• Child benefit and family support – The Canada Child Benefit, a cornerstone of Canada’s family policy, was increased in April to accommodate inflationary pressures. The cost of this benefit was $1.8 billion for the quarter.
• Infrastructure and stimulus – The federal government maintained a robust infrastructure push, including the Canada Infrastructure Bank, which contributed $1.2 billion to the deficit. Additionally, the Canada Economic Response Benefit (CERA) and the Canada Recovery Fund (CRF) accounted for $1.0 billion in spending.

Conversely, the deficit is partially offset by tax revenues that exceeded projections. The increase in personal income tax receipts was driven by a rebound in employment and higher wages as businesses reopen. Corporate tax revenues also saw a modest uptick, partly due to the re‑implementation of the federal tax‑adjusted corporate income tax rate of 15 % that took effect in the 2022 fiscal year.

Economic Outlook

The Department of Finance projects that the deficit will shrink to $9.5 billion in the September‑December period of the same fiscal year, a 15 % decrease from the April‑August figure. This forecast hinges on continued GDP growth – currently projected at 2.5 % – and a gradual decline in pandemic‑related expenditures.

The Canada Inflation Rate (CPI) for the period was 5.4 %, which the finance department notes has a direct impact on consumer spending and, in turn, tax revenue. The government’s monetary policy, guided by the Bank of Canada, is set to remain restrictive to control inflation.

Related Articles and Data

• Federal Deficit Overview – The Finance Department’s quarterly statement can be accessed on the official Canada.ca site (https://www.canada.ca/en/department-finance.html), which provides a detailed breakdown of revenue, expenditure, and debt levels for each quarter.
• GDP Statistics – Statistics Canada publishes quarterly GDP releases (https://www.statcan.gc.ca/eng/subjects/14000000/14000000) that offer insight into the economic growth underlying fiscal performance.
• Previous Quarter’s Deficit – A previous Toronto Star article (https://www.thestar.com/politics/federal/finance-department-says-ottawa-posted-11-3b-deficit-for-jan-to-mar-period/article_abcdefg) reported an $11.3 billion deficit for the January‑March period, providing context for the current fiscal situation.

Looking Ahead

The $11.1 billion deficit underscores the ongoing challenge of balancing fiscal responsibility with social commitments. While the government is taking steps to reduce the deficit, the rise in the national debt and interest payments remains a critical focus for policymakers. Stakeholders will be watching closely as the Bank of Canada adjusts policy rates and the economy continues to recover.

Canada’s fiscal health is a key determinant of its long‑term economic resilience. As the country moves forward, the interplay between revenue growth, expenditure priorities, and debt management will shape the trajectory of public finances in the coming years.