A recent analysis by the C.D. Howe Institute projects that Canada's federal deficit will exceed $92 billion in the 2025 fiscal year. This increase is largely attributed to Prime Minister Mark Carney's commitment to meet NATO's defence spending target of two percent of GDP. Despite government promises of internal savings, job cuts, and fiscal restraint, Canada's federal bureaucracy expanded to a record 445,000 employees in 2024–25. The government plans to implement cost-cutting measures across Crown corporations and other federally funded institutions as part of this effort. However, concerns remain about the effectiveness of these measures, with some experts expressing doubts about Carney's ability to significantly reduce spending. The increased defence spending is expected to provide some economic lift but is unlikely to pull Canada out of recession. Additionally, the surge in government spending during the pandemic, led by Prime Minister Justin Trudeau's administration, has been identified as a major factor contributing to the recent inflation surge, rather than policies from the Bank of Canada. The expansion of government debt is set to reach a record high this fiscal year as Carney pledges to use the federal balance sheet to invest in the economy. There are also concerns about the impact of combined tax cuts and increased defence spending on Canada's AAA credit rating.