January 27, 2009 / 9:54 PM / in 9 years

Canada pledges C$12 billion in infrastructure spending

OTTAWA (Reuters) - The Canadian government pledged in its 2009 budget on Tuesday to spend almost C$12 billion ($9.8 billion) over the next two years as part of a broader plan to stimulate an economy hit hard by the global financial crisis and falling commodity prices.

Canadian Finance Minister Jim Flaherty said the spending would target “shovel-ready” projects that can start this upcoming construction season, include roads, bridges, public transit, clean energy, broadband Internet access, electronic health records, laboratories and border crossings.

“We are launching one of the largest building projects in Canadian history,” he said in his budget speech.

The plans include a C$4 billion fund to renew infrastructure in partnership with Canadian provinces and municipalities. But the program requires these lower levels of government to provide up to half of the cost of the projects. Some critics have argued cash-strapped provinces and municipalities won’t be able to come up with the matching funds.

“In terms of the projects that the provinces and municipalities have been keen on, there’s already been talk about putting some funding in places,” said Paul Ferley, assistant chief economist at RBC Financial Group.

“The risk though is we are going into a weak economic environment and that could undermine some of that.”

The government also announced C$1 billion in spending over five years for green energy projects, C$500 million for local recreation centers and another C$500 million specifically for infrastructure projects in small communities.

Investments in purely federal projects will include C$407 million to improve the government-owned VIA passenger rail service, with a focus on more frequent service and shortening travel time. Another C$323 million will be allocated for the restoration of federally owned buildings.

The budget will also include C$515 million over two years to improve the infrastructure in Canada’s often impoverished aboriginal communities, with schools and water projects a priority.

Other spending targeting “knowledge” infrastructure includes C$2 billion to repair, retrofit and expand facilities at universities and colleges, C$750 million for research infrastructure and C$500 million to encourage greater use of electronic health records.

($1=$1.23 Canadian)

Editing by Peter Galloway

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