Julie Gordon and Steve Scheerer

OTTAWA (Reuters), Canada’s Liberal Party will announce their 2022 budget Thursday. Justin Trudeau, Prime Minister of Canada, promised that it would be “fiscally accountable” following the pledges by billions to increase military spending and new programs.

Trudeau’s Liberals are under increasing pressure from Canada’s recovery from the pandemic to cut back on new spending, fearing that runaway inflation will continue at its 30-year peak.

Stephen Brown, senior Canada economist with Capital Economics, stated that the ultimate effect of spending more will be determined by which policy measures are taken. This was in a note sent to investors.

But, as the economy is already functioning at maximum capacity, there’s a clear danger that additional stimulus could increase inflationary pressures.”

At 4 PM, the Budget will be presented to Parliament. Chrystia Freedomland, Finance Minister, will present the budget at 4 p.m. ET. A top government source said to Reuters the document can be split into three groups.

The space is available for investments in people. Sources say there is a place to invest in climate change and sustainable economics of tomorrow. They also have a spot for growth and innovation investments.

Reuters announced Wednesday that C$15billion ($12billion), over five years, will go towards a fund for private investment in green or new technologies.

Reuters reports that the budget will include at least C$2 trillion for a strategy to increase Canada’s production of essential minerals necessary for electric vehicles supply chains.

The budget will include long-term funding for a new national dental program that is affordable to low-income Canadians. This is because it was a crucial peg of the Liberals’ support agreement with the New Democrats. This agreement will secure Trudeau’s position until 2025.

He also pledged more military spending in response to Russia’s invasion and affordable housing.

According to the Canadian Broadcasting Corporation, Canada’s Defense Department could receive up to C$8 Billion in additional money. This is according to a source close with government.

CTV News reports that the federal government is under increasing pressure to take action on rising home prices and will make it illegal to purchase residential property in Canada within two years.

Trudeau said Wednesday that the declining ratio of debt to GDP would be a key fiscal anchor in the budget.

According to the December fiscal update by Liberals, C$58.4Billion would be the deficit for 2022/23 compared to C$144.5Billion in deficit for 2021/22.

Economists believe that additional fiscal spending could force Bank of Canada into aggressive rate hikes this year. This includes a rare move of 50 basis points next week.

“The propensity to spend, despite revenue uplifts, reinforces our conviction around the Bank of Canada’s next moves,” said Rebekah Young, Scotiabank’s director of Fiscal & Provincial Economics, in a note.

($1 = 1.2513 Canadian dollars)