More spending cuts are expected in the federal budget, which will be delivered by Finance Minister Jim Flaherty Thursday afternoon.
Sources told The Globe and Mail Flaherty will freeze or cut spending on an assortment of programs and eliminate some corporate-tax exemptions, in an effort to balance off $2-billion less revenue for 2013.
It follows a downward forecast on economic growth to just 1.6 per cent from the early prediction of two per cent.
The key for Flaherty’s budget will be how the government will protect its spending priorities and eliminate the deficit by 2015.
The Globe reported long-term spending plans will stay in place, and the hope is that the U.S. economic recovery will help bolster the Canadian economy later in the year.
Part of the shortfall will be absorbed by the Department of National Defence, with an eight per cent cut to its operating and maintenance budget, on top of $226 million in previously announced cutbacks.
Other areas could include environmental regulations, inspections, border security and other government programs.