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Investing.com -- Canada’s finance chief is ordering deep program spending cuts to fund an ambitious defense expansion and align with fiscal commitments made by the new administration, Bloomberg reported. Finance Minister Francois-Philippe Champagne has instructed cabinet members to trim 7.5% from departmental budgets for the 2026-27 fiscal year, increasing those reductions to 10% and 15% in the two subsequent years, respectively, according to officials familiar with the directive.
The instructions, delivered in a letter sent Monday, signal a rapid shift toward fiscal consolidation as Prime Minister Mark Carney pushes to reduce spending growth. The letter, first reported by the Globe and Mail and confirmed by Bloomberg, is part of a broader effort to control spending while executing a historic boost to defense investment.
Canada’s program spending is projected to surpass C$500 billion ($366 billion) in the current fiscal year, according to federal estimates. That leaves little room to maneuver as Ottawa balances infrastructure commitments and mounting defense obligations under constrained fiscal conditions.
During the election campaign, Carney vowed to restrict overall government spending growth to 2% per year, yet significant new outlays, particularly in defense procurement and modernization, have complicated efforts to keep expenditure in check.
In June, the Carney government announced that it would increase defense spending by approximately C$9 billion, aiming to meet NATO’s target of allocating 2% of GDP to military expenditures. While the move received strong support from NATO allies, it added further strain to an already tight federal budget.
Champagne’s directive has raised internal questions about the sustainability of government service delivery in light of such aggressive cuts. Departments are now working to identify options for trimming operations ahead of the fall fiscal update when adjustments are expected to be formalized, Bloomberg reported.