A recent report from the Fraser Institute highlights a troubling trend: combined federal and provincial government debt in Canada has surged to unprecedented levels. Since the 2007-08 fiscal year, adjusted for inflation, total debt has nearly doubled from $1.24 trillion to a projected $2.44 trillion in 2025-26. This escalation poses significant challenges to economic growth and fiscal sustainability.
Debt Growth Since the Pandemic
From the onset of the COVID-19 pandemic in 2020 through 2025-26, total net debt for both levels of government increased by 32.8%, or $603.7 billion, after adjusting for inflation. This rapid accumulation has occurred without concrete plans from federal or provincial governments to return to balanced budgets.
Interest Payments Burden Taxpayers
In the current fiscal year, the federal government is projected to spend $58.7 billion on interest payments for its net debt of $1.4 trillion. This amount exceeds the $57.4 billion transferred to provinces for healthcare. By 2030-31, interest payments are expected to reach $80.9 billion on a projected federal debt of $1.63 trillion. These funds will not be used to lower taxes, improve public services, or reduce the debt itself.
Provincial Debt Per Capita
The report provides a detailed breakdown of net debt per person across provinces in 2025-26:
- Newfoundland and Labrador: $71,611
- Ontario: $63,574
- Quebec: $63,488
- Manitoba: $60,603
- Nova Scotia: $56,085
- Prince Edward Island: $55,521
- British Columbia: $54,000
- New Brunswick: $51,226
- Saskatchewan: $49,530
- Alberta: $42,368
Debt as a Percentage of GDP
When measured as a share of gross domestic product, combined debt levels vary widely:
- Manitoba: 91.3%
- Newfoundland and Labrador: 89.7%
- Quebec: 89.1%
- Nova Scotia: 89.1%
- Prince Edward Island: 88.8%
- New Brunswick: 88.1%
- Ontario: 82.7%
- British Columbia: 69.0%
- Saskatchewan: 53.2%
- Alberta: 43.4%
Economic Implications
Study author Jake Fuss warns that rising debt levels could lead to higher long-term interest rates, increasing borrowing costs for the private sector. This, in turn, reduces incentives for capital investment, hampering productivity and future economic performance. To thrive economically, Canadian governments must prioritize debt reduction rather than continued accumulation.
