The country’s top financial policymakers warned Canadians on Sunday to brace for tough decisions and “very big challenges” ahead as Canada tries to secure its recovery in an ever-changing global economic landscape.

Finance Minister Jim Flaherty — set to deliver a key speech on federal economic policy in Oakville, Ont., on Monday — said the Conservative government is determined to cap program spending so Canada can return to a balanced budget position and avoid the turmoil Europe is undergoing.

He acknowledges this won’t be a popular decision, with certain segments of the population and his political opponents.

“We have to make sure we protect the country going forward,” he said in a TV interview. “Look at what’s happening elsewhere … like the issues they are dealing with over the weekend in Ireland. We don’t want to get into any fiscal trouble in Canada.

“We still have to watch what’s happening in the world, and be careful that we preserve this modest recovery,” the Finance Minister added. “And that means we cannot act in any sort of extreme or dramatic way.”

The government has forecast returning to a balanced budget by 2016, through reducing spending growth in key areas and allowing the two-year, $48-billlion stimulus plan to expire as planned at the end of this fiscal year.

His speech in Oakville is expected to draw clear boundaries for his political opponents about what the minority government will and won’t undertake in the next federal budget, to be tabled early next year.

Meanwhile, Bank of Canada governor Mark Carney warned there are “some very big challenges” ahead for the global economy set to play out over the next several years.

“There are stresses in the global system without question, and they are going to take years to play out and policy decisions are going to continue to matter,” Mr. Carney said in a radio interview. “There are ways to get this right, and ways to get this wrong.”

The global economy has reached a rather precarious spot, as the recovery slows, Europe’s debt woes re-emerge, and inflation threatens the growth-engine in the increasingly vital emerging economies. In addition, there are heightened tensions among struggling advanced economies and faster-growing emerging markets over foreign-exchange policy, prompting countries to intervene in order to cap the appreciation in their currencies.

Group of 20 members met this month in Seoul but failed to come to an agreement on dealing with the currencies issue. “We didn’t make as much progress quite frankly as we had hoped,” Mr. Flaherty said.

Mr. Carney also stressed the need for global policymakers to instill additional market discipline on banks by removing so-called “moral hazard” from the system, in which the private sector relies on governments to save lenders that get in trouble due to excess risk taking.

“We have to get rid of that,” the central bank governor said.

He also debunked reports that Royal Bank of Canada was on a list of banks deemed by global banking authorities to be too big to fail. Mr. Carney said Canada’s biggest bank was “not on that list,” as compiled by the Financial Stability Board.