OTTAWA – The Canadian government on Tuesday, November 4, 2025, unveiled an ambitious federal budget that projects a C$78.3 billion deficit for the 2025-26 fiscal year, a significant increase aimed at funding what it calls “generational investments” to reshape the nation’s economy amid global instability. The plan, titled “Canada Strong,” allocates approximately C$280 billion over five years towards infrastructure, defence, housing, and clean technology, while also planning C$60 billion in savings over the same period through cuts to government operations.

Presented to Parliament by Finance Minister François-Philippe Champagne, the budget marks the first from the new government of Prime Minister Mark Carney. It confronts what the document describes as a global “rupture” in the economic and geopolitical order, underscored by trade tensions with the United States and a worldwide slowdown. “The world is undergoing a series of fundamental shifts at a speed, scale, and scope not seen since the fall of the Berlin Wall,” the budget document states.

The projected C$78.3 billion deficit is nearly double the C$42.2 billion forecast in the previous government's fiscal update, a move officials defend as a necessary response to economic “headwinds.” The government argues that by separating spending into capital and operational streams, it can invest heavily in long-term growth assets while aiming to balance its day-to-day operating budget by 2028-29. Despite the increased deficit, officials note that Canada maintains one of the lowest net debt-to-GDP ratios in the G7.

Key Spending and Strategic Shifts

The budget outlines several core investment areas intended to boost Canada’s sovereignty and productivity:

• Defence: A substantial C$81.8 billion is earmarked for defence over five years, with roughly C$72 billion being new funding. This move is framed as a response to an “increasingly dangerous and divided world.”
• Infrastructure: A new “Build Communities Strong Fund” will provide C$51 billion over ten years for local infrastructure projects such as roads, water systems, and health facilities.
• Housing: A new agency, Build Canada Homes, will be established with C$7 billion to focus on affordable housing. The budget also includes previously announced investments of C$13 billion over five years for non-market and factory-built housing.
• Clean Economy: The budget expands and extends several investment tax credits for clean technology manufacturing and carbon capture projects to attract private investment and support Canada’s climate goals.

To offset this new spending, the government plans a “Comprehensive Expenditure Review” designed to save C$13 billion annually by 2028-29. This includes a reduction of about 40,000 positions from the federal public service over the coming years, bringing employee numbers down to 2021 levels.

Implications for Kenya and Global Relations

While the budget focuses heavily on domestic resilience, its strategic shifts carry international implications. The plan’s emphasis on diversifying trade away from the U.S. could create new opportunities for partners in other regions. However, the budget also signals significant cuts to international assistance. According to an analysis by the Canadian Centre for Policy Alternatives, international aid could be cut by C$800 million annually, reducing Canada’s development-to-GDP ratio from 0.32 percent to 0.26 percent by 2028. It remains unclear which specific country programs will be affected.

Canada-Kenya relations have historically been strong, founded on shared interests in security, poverty reduction, and trade. In 2023, Canadian exports to Kenya, primarily wheat and aerospace products, reached C$110.8 million, while imports from Kenya, mainly coffee and tea, were C$46.4 million, according to Global Affairs Canada. More recent data from August 2025 shows a positive trade balance for Canada, with exports to Kenya at C$9.12 million and imports at C$7.18 million.

The budget's proposed cuts to foreign aid and Global Affairs Canada could impact development and diplomatic programming in East Africa. However, Canada has recently announced other funding streams, including over C$87 million in February 2025 for climate action projects in developing countries, one of which is the Makueni Women’s Empowerment Project in Kenya. The Canadian government has stated its overall international assistance will be guided by “leveraging innovative tools, while focusing support for countries that need it the most,” leaving the precise impact on Kenyan programs subject to further clarification.

Economists project Canada’s real GDP growth to be modest, around 1.1 percent in 2025, down from previous forecasts due to global trade uncertainty. The government's high-spending strategy is a calculated risk, betting that major capital investments now will generate a stronger, more self-reliant economy in the future, a plan whose success will be watched closely by its global partners, including those in East Africa.