The federal government teased the pillars of Canada’s upcoming AI strategy and a new procurement policy for small and medium businesses in the Spring Economic Update.
However, there was little else new for the tech industry, prompting criticism from some leaders in the sector who say they were hoping to see more to spur innovation.
“Today’s economic update does little to show that the government is taking the digital economy seriously or using it to strengthen Canada’s major traditional economic strategies,” Council of Canadian Innovators CEO Patrick Searle said in a release.
Tabled by Finance Minister François-Philippe Champagne on Tuesday evening, the update builds on some of last year’s budget commitments to the defence and innovation sectors, including updates on stablecoin regulation and making the employee ownership trust (EOT) tax incentive permanent.
A new Small and Medium Business Procurement Program plans to “make it easier for Canadian firms to compete and win in federal procurements” later this spring.
While the new national AI strategy is yet to be revealed, the Spring Economic Update outlined for the first time the six pillars that will inform that document.
The first pillar focuses on protecting Canadians and “safeguarding democracy” through new privacy and online safety laws, the second on empowering Canadians with AI training, and the third on supporting AI adoption in small-to-medium-sized enterprises (SMEs) and in the public service.
The fourth pillar, titled “Building the Canadian Sovereign AI Foundation,” will support building sovereign compute infrastructure and growing Canada’s AI research and talent pool. Pillar five will focus on “Scaling Canadian Champions,” by unlocking growth capital and leveraging the government as an anchor customer. The final pillar aims to align standards and co-invest in innovation with “trusted partners” while helping Canadian companies access global markets.
Grace Lee Reynolds, CEO of Toronto innovation hub MaRS Discovery District, said in a statement that these pillars signal that the government sees AI as an economic opportunity to lead, “not just a technology to regulate.”
“The commitment to scaling Canadian AI companies, through growth capital and government as an anchor customer, is exactly what the startups and scaleups we work with need to grow here and stay here,” Lee Reynolds said.
AI Minister Evan Solomon is in charge of delivering the Canada’s refreshed AI strategy, which was initially promised to drop before the end of 2025 but has been repeatedly delayed. The strategy is shaped by more than 11,000 public consultation submissions, which BetaKit analyzed the results of that consultation thisis week, finding that Canadians expressed equal concern for AI’s potential ethical harms as well as interest in possible economic gains.
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Josh Tabish, senior director for Canada at tech policy advocacy group Chamber of Progress, told BetaKit in an email that while it would be “easy to dunk on the government for taking this long,” he’s glad to see thoughtful policy beginning to take shape “on a technology that could shape Canada’s competitiveness for a generation.”
The economic update dropped on the one-year anniversary of Prime Minister Mark Carney’s 2025 election win. A lot has changed since then. Through a series of by-election wins and floor crossings, Carney’s Liberals turned their minority government into a majority this month, giving them near-total control over the fate of future legislation in the House of Commons.
The Liberals are now in the process of using their newfound power to restructure committees, which were established under the minority government, so that they have a majority for future legislation.
New procurement program
The 2025 budget, which officially became law last month, sported one trillion dollars in new investments over the next five years; a $78.3-billion deficit for 2025-26; and major commitments to the Canadian tech ecosystem that outlined the federal government’s approach to AI, quantum, venture capital programs, financial services innovation, and defence.
The budget set forth a Buy Canadian Policy for the federal government, which the Spring Economic Update said is “already making a difference” with more than $520 million in contracts awarded to date. The Update also included plans to launch a new Small and Medium Business Procurement Program later this spring to “make it easier for Canadian firms to compete and win in federal procurements,” by modernizing digital tools and reducing barriers.
In a statement, Lee Reynolds said that Canada needs this kind of policy alignment for its talent and companies to scale.
While the statement signposts forthcoming strategies and policies that may remove barriers to scale, today’s statement came up short.”
Patrick Searle
CCI
“A new SME procurement program that delivers on its intent could open a door [that] has historically been very hard for early-stage companies to open,” Lee Reynolds said.
Canada is also reporting an improved deficit projection for 2025-2026, coming in at $66.9 billion, $11.5 billion lower than last year’s budget projected. Speaking with reporters on Monday, Prime Minister Mark Carney had said the update would bring “good news” on the government’s fiscal position.
On Monday, Carney also revealed the cornerstone of the fiscal update: the creation of Canada’s sovereign wealth fund. Dubbed the Canada Strong Fund, it will launch with an initial $25-billion contribution from the federal government to be invested in Canadian projects and companies alongside the private sector.
Reaction to the fund was mixed, with Opposition Leader Pierre Poilievre noting during question period following the update that sovereign wealth funds are typically managed by countries with surpluses, not deficits. Others, like Senator Colin Deacon and MaRS Capital program head Liam Gill, have expressed hope that the fund will be used to invest in growth companies. The government said further details on the fund’s mandate, structure, and implementation plan will be provided in the coming months.
Defence and finance updates
Defence was a clear priority in the 2025 budget, with $81.8 billion committed over five years to “rebuild, rearm, and reinvest” in the Canadian Armed Forces (CAF), including the establishment of the Defence Investment Agency (DIA) and the $6.6-billion Defence Industrial Strategy (DIS).
While the budget earmarked $30.8 million over four years ($7.7 million ongoing) to launch the DIA within Public Services and Procurement Canada, the Spring Economic Update now proposes to provide the DIA with $103.8 million over five years, starting in 2026-27, ($22.3 million ongoing) to establish and operate the DIA as a stand-alone entity. The government also wants to make legislative amendments to the Defence Production Act to provide the DIA with “expanded authorities.”
RELATED: Evaluating Canada’s Defence Industrial Strategy
Another standout piece of the budget was the movement on long-awaited files in Canada’s financial services sector, including in open (or “consumer-driven”) banking and the Stablecoin Act. The Spring Economic Update didn’t provide much more detail on both fronts, but did commit to a 2026 launch for the real-time rail payments system, and that the government intends to engage with federally regulated financial institutions on the development and potential use of stablecoins. The government said it expects to outline its next steps on stablecoin policy heading into Budget 2026.
Industry group Fintechs Canada said in a statement that it’s pleased to see a renewed commitment toward key financial sector reforms. “A modern, real-time payments system is foundational to a more dynamic, innovative, and competitive financial ecosystem,” the statement read.
The Spring Economic Update also proposes making the Employee Ownership Trust tax incentive permanent, heeding calls from business leaders to save the incentive from expiring this year. EOTs provide a path for retiring business owners to pass the torch directly to their company’s workers, while the tax incentive provides relief for those exiting owners on up to $10 million of capital gains tax.
Employee Ownership Canada (EOC), which penned an open letter advocating for the permanent change, said in a statement that owners can now choose a succession path rooted in their values rather than a deadline.
“For the first time, business owners can plan an EOT transition with complete certainty, and the workers and communities on the other side of those decisions will be better for it,” EOC board member Chad Friesen said in a statement.
Innovation lacking
In two months, Canada will meet with the US and Mexico to renegotiate the CUSMA trade agreement. Last week, Carney named a new US economic advisory committee—which, like this update, also faced criticism for a lack of innovative representation.
CCI’s Searle argued that, given the critical timing, today’s update does not do enough to strengthen Canada’s economic position or tell innovators that Canada supports their growth.
“Digitally minded and innovative firms are what drive the productivity and growth improvements Canada needs to address to support affordability and investment challenges across the country. While the statement signposts forthcoming strategies and policies that may remove barriers to scale, today’s statement came up short.”
Vass Bednar, Managing Director for the Canadian Shield Institute, appeared to agree.
While trade and defence are worthy priorities, Canada hasn’t seen enough movement on building digital sovereignty, Bednar told BetaKit in an email.
“The digital economy is an area where Canada’s sovereignty is weakest; we are dominated by foreign hyperscalers, and we assert very little Canadian governance. Enhancing our digital sovereignty is an enormous job, and I hope to see more concrete progress on this soon,” Bednar said.
With files from Sarah Rieger.
Feature image courtesy François-Philippe Champagne via X.