Fitch issues new warning on federal spending and public debt

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OTTAWA – A major global rating agency is issuing a new warning over federal debt it says could become more difficult to fight once the pandemic has passed.Fitch Ratings downgraded Canada’s triple-A credit rating in June, dropping the country to an “AA +” rating due to what it called “Canada’s deteriorating public finances” due to COVID- 19.

The ruling came before the Liberals released an update to the outlook in early July for federal spending, which projected a deficit of $ 343.2 billion and debt of over $ 1.2 trillion.

These numbers were before the Liberals last week pledged to spend $ 37 billion to revamp income support programs for hard-hit workers.

Fitch said in a note that gross government debt will account for 120 percent of economic output, which is “significantly higher” than the median of a double-A rating.

The rating agency said it expects a sharp decline in government spending from 2021, but the growing deficit will make it more difficult to contain spending and debt over the medium term.



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