The new administration of Montreal Mayor Soraya Martinez Ferrada has made a decisive move to confront the city's debt, announcing a 2026 operating budget that accelerates the timeline for financial recovery. The $7.67-billion budget allocates additional funds to debt payments, setting a course to achieve a crucial fiscal benchmark one year ahead of the previous plan.
A Shift in Fiscal Strategy
In her first year at the helm, Mayor Martinez Ferrada has chosen to prioritize debt reduction. The administration is redirecting money within the massive operating budget to increase payments on the city's long-term loans. These loans finance essential capital projects like road construction, building upgrades, and bicycle path networks, with their servicing costs paid from the annual operating budget.
The core of the strategy is a return to the city's self-imposed policy of maintaining a net debt-to-revenue ratio of no more than 100 per cent. This benchmark, established in 2004 as a sign of sound financial management, was temporarily suspended by the previous Projet Montréal administration under Mayor Valérie Plante. That administration had sought permission to allow the ratio to rise to 120 per cent to fund increased capital investments, pledging a return to 100 per cent by 2027.
Injecting Funds to Accelerate the Timeline
The Martinez Ferrada administration is now targeting that 100 per cent goal for 2026—a full year earlier. To make this possible, the city is pouring an extra $87.3 million into debt payments in the coming year. Furthermore, it will increase cash payments for capital works projects by $15 million in 2026, reducing reliance on new borrowing.
This aggressive approach will see the city's gross debt servicing costs reach $1.27 billion in 2026, consuming 16.6 per cent of the total operating budget. This amount, which is shared by Montreal and its island suburbs and includes debt from the Société de transport de Montréal (STM), represents an $87.3-million increase over the 2025 payments.
The Current Debt Picture and Future Outlook
As of the end of 2024, Montreal carried $11.8 billion in outstanding debt. It was estimated that the previous administration would add $1.4 billion in new loans in 2025. The newly tabled 2026 budget forecasts another $1.09 billion in new borrowing this year, but projects a net reduction of $172 million in the total outstanding loan balance by year's end.
Despite the significant debt burden, international credit-rating agencies have maintained Montreal's credit rating with a stable outlook for years. The city's net debt-to-revenue ratio peaked at 114 per cent during the pandemic in 2021 and has since fluctuated between 104 and 108 per cent. Officials estimate Montreal ended 2025 with the ratio at 103 per cent, with final figures to be confirmed in spring financial statements.
The move by Mayor Martinez Ferrada's team builds on a recent trend of slowing debt growth initiated in the latter years of the Plante administration, which began using more operating budget cash to fund projects instead of loans.
