Canada's Debt Crisis Deepens: Combined Federal and Provincial Debt to Surpass $2.44 Trillion
As Canadians grapple with soaring prices and mounting personal debt, a new study from the Fraser Institute highlights the alarming trajectory of government indebtedness since the 2008 recession. The public policy think tank's latest research bulletin reveals that combined federal and provincial net debt, adjusted for inflation, has nearly doubled from $1.24 trillion in 2007-08 to a projected $2.44 trillion this fiscal year—a staggering 97.7% increase.
Jake Fuss, the study's author and director of fiscal studies at the Fraser Institute, noted that the federal government has accumulated nearly double the amount of debt it repaid during the mid-1990s to late-2000s. Over the 18-year study period, Ottawa's net debt surged by $712.7 billion, a 93.7% rise, with much of the increase occurring during the COVID-19 pandemic response.
Provincial Debt Burdens Vary Widely
At the provincial level, British Columbia experienced the most dramatic increase, with net debt soaring 200% to $70.3 billion. Manitoba followed with a 144.7% rise to $22.5 billion, Saskatchewan with 108.9% to $9.4 billion, and Ontario, the province with the highest debt, saw a 94.9% increase to $459.4 billion. Alberta, once the only province with a net financial asset position, has now joined the ranks of indebted provinces, adding $91.3 billion in net debt over 15 years. Quebec and three of the four Atlantic provinces (excluding Prince Edward Island) managed to keep debt increases to 35% or less.
Debt as a Share of the Economy
The study also examined debt relative to Canada's gross domestic product (GDP). Combined net debt now represents a projected 75.4% of GDP, with the federal share at 45.4% and provincial share at 29.9%. This marks a significant departure from the era of fiscal prudence seen from the mid-1990s to the late 2000s, when governments reduced debt burdens. The current trend mirrors the 1970s to 1990s, when accumulating debt and deficits became the norm.
Fuss emphasized the need for a long-term plan to return to balanced budgets. "A long-term plan to return to balanced budgets is necessary if Canadian governments are going to begin the difficult task of stemming debt accumulation and eventually reducing the debt burden," he wrote. In contrast, during the 12 years before the study period, federal net debt was reduced by $364.5 billion.
The report underscores the urgency of addressing government debt, especially as interest payments on the debt now cost approximately $2,000 per Canadian citizen annually. Without decisive action, the debt burden will continue to grow, squeezing public finances and limiting future spending on essential services.
