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Trudeau government considering immediate $1-billion stimulus for hard-hit Alberta, Saskatchewan

Trudeau campaigned in last fall's federal election on a deficit of no more than $10 billion in his first year, a pledge he and his ministers have since tacitly abandoned. They now say the country's debt-to-GDP ratio will continue to decline.

Canadian Prime Minister Justin Trudeau has decided to focus initial stimulus efforts in oil-producing Alberta and Saskatchewan, while waiting to assess whether further stimulus is needed nationwide, according to officials familiar with the plans.

The government is in talks to quickly allocate $1 billion for infrastructure projects in the two provinces — money earmarked by the previous government’s infrastructure fund but not yet delivered, two of the officials said. The move is part of a decision to prioritize new infrastructure in the two provinces because the impact of the oil-price shock is strongest there, said three government officials who spoke on condition of anonymity because budget decisions aren’t yet final.

As the economic outlook deteriorates, the government has been resisting pressure to dramatically change its fiscal plans, worried it would undermine a campaign pledge to be fiscally prudent. Trudeau campaigned in last fall’s federal election on a deficit of no more than $10 billion in his first year, a pledge he and his ministers have since tacitly abandoned. They now say the country’s debt-to-GDP ratio will continue to decline.

“We’re looking very, very hard at what needs to be done,” Trudeau told reporters Monday afternoon. “We’ve always said that being fiscally responsible while creating growth is at the heart of what the Liberal Party is, and that’s exactly what we’re going to do.”

Last week Canadian Imperial Bank of Commerce Chief Economist Avery Shenfeld said a deficit as deep as $30 billion was needed to revive growth, and this week former Bank of Canada Governor David Dodge urged Trudeau to ramp up fiscal stimulus to take the pressure off monetary policy.

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