The international agency on Tuesday released its services’ preliminary conclusions on the completion of its recent mission to Canada.

The report recognizes the actions Canada is taking to meet its climate commitments and encourage investment in green sectors. But the IMF says there are “risks” in the design of some stimulus measures.

The IMF also commends Canada’s climate action, including its carbon pricing system and federal budget 2023 investments in the “green economy.”

However, he recommends better international coordination to avoid a “race to the bottom” in which countries compete to provide even larger subsidies.

The IMF also argues that the current focus on electric vehicles – and their batteries in particular – as Canada’s “key to green industrial development” will require a “cautious approach” given rapid technological change.

The IMF report also states that Canada should consider a standardized incentive system to promote fairness and transparency, rather than negotiating company-specific arrangements.

The IMF’s preliminary report comes at a time when the liberal federal government is announcing historic investments in the “green economy” and luring automakers like Stellantis and Volkswagen with billions of dollars in subsidies.

deficits and debts

In its preliminary report, the IMF staff also offers an analysis of the current economic situation in Canada. It is therefore believed that the Bank of Canada’s recent rate hike was warranted as the Canadian economy is more dynamic than expected.

Turning to fiscal policy, the IMF says government spending should remain tight to help bring down inflation in the country. The organization also recommends better fiscal anchors, or targets, to balance spending and revenue.

“Although Canada’s public debt is relatively low compared to other countries around the world, it is still well above pre-pandemic levels,” the report said.

The international agency says Canada should look to rebuild its fiscal reserves so the government can handle future crises that will require higher spending.

The IMF has also called for more action to improve housing affordability and supply, including increased coordination of housing policies between levels of government and various stakeholders.

“While the Housing Acceleration Fund announced in the 2022 budget, which aims to incentivize municipalities to expand housing supply, is a step in the right direction, much more needs to be done to speed up permitting and encourage intensification.” , says the report.

In a press release, Treasury Secretary Chrystia Freeland welcomed “the IMF’s conclusions”. According to them, this report “highlights Canada’s resilient economy, stable fiscal outlook, clean economy plan, and action to address the affordable housing problem.”