The Liberal government may have chopped $35.8 billion off the net federal public debt, but that still leaves $547.4 billion. At 50.5% of gross domestic product, that is still very high.

The government plans no further reductions in debt over the next two years. It justifies this by saying that economic conditions are so weak that any surplus at the end of the fiscal year should be used for spending, instead of paying off debt.

However, the government does not plan to use any excess funds for near-term stimulus but, instead, will put it into a Strategic Infrastructure Foundation and/or an Africa fund. However worthwhile these are, they would not provide stimulus to the Canadian economy in 2002.

Actually, Martin is being crafty in assigning surplus funds to these projects. He gets the credit of at least intending to act in these important areas but does not have to do so if he doesn’t have the money.

Whether these projects are a better use of surplus funds than debt reduction is certainly open to debate. However, Martin probably had no choice. The Liberal caucus would almost certainly not have tolerated even a suggestion of debt reduction, which they would have viewed as pandering to big business at the expense of those bearing the burden of hard economic times.

Nevertheless, Martin will have to make it clear in his next budget that debt reduction is back on the front burner. Otherwise the financial community, both here and abroad, may lose faith in the government’s commitment to fiscal responsibility, portentially further battering our already fragile Canadian dollar.