Citing data obtained from various government budgets, the institute calculated that the combined federal-provincial net debt is projected to reach a record high of $2.4 trillion in fiscal year 2025–26. The amount translated to $94.4 billion in interest payments that Canadians will have to bear that year.
The per-person interest payments vary widely across provinces, with residents in Newfoundland and Labrador facing the highest sum at $3,348, while Manitobans take the second spot at $2,816 per person, the study noted.
‘Fastest Growing’
Over half of the combined interest costs come from the federal government. Based on projections from the Department of Finance, the think tank said Ottawa is expected to spend $54 billion on debt servicing charges in 2025–26. The amount, which also represents 10.6 percent of total federal revenues, is “roughly equivalent to what the government spent on the Canada Health Transfer ($54.7 billion),” and “significantly” more than the $38.1 billion it expects to spend on child care benefits.
The institute said that when interest charges increase, fewer resources remain for governments to use to implement tax relief and public programs, including in health care, education, and social services.
“[T]he more money governments spend on interest payments the less money is available for the programs and services that matter to Canadians,” Fuss said in the release.
The report also “put these costs into perspective” by comparing them against other government spending priorities, using the four most populous provinces in the country for illustration.
In Ontario, the government is projected to spend $16 billion on interest costs in 2025–26, which is $2 billion more than what it spends on post-secondary education, the report said. Meanwhile, the combined federal-provincial interest costs for Ontarians will total $37.1 billion that year, almost as much as what the province plans to spend on its K-12 education ($40.5 billion) in 2025–26.
With each Ontarian facing $2,282 in per-person interest costs in that year, the province projected in its 2026 budget that interest costs will grow at an average yearly rate of 7.1 percent between 2025–26 and 2028–29, compared to the expected annual health care spending growth of 2.9 percent.
‘Spectre of Tax Increases’
Quebec ranks third highest at $2,436 per person—representing $22.1 billion in total annual interest payments in 2025–26 from federal and provincial debt. The interest payments nearly match what the province has set aside for K-12 education this year at $23.5 billion, according to Fuss’s calculations.In British Columbia, Fuss calculated that the province will spend $5 billion on interest charges in 2025–26, more than what it intends to spend on child welfare ($4.5 billion). With the federal portion of $7.4 billion in interest payments added, every British Columbian will have to pay $2,185 per person that year. Notably, the combined costs of $12.5 billion exceed what the B.C. government expects to collect in sales tax revenue ($10.7 billion) in 2025–26.
Although Alberta faces the lowest per-person interest costs in Canada, the study said the province has seen annual interest costs rise from less than $1 billion to $2.9 billion between 2015–16 and 2025–26, almost twice what the provincial government expects to spend on children and family services ($1.6 billion).
The think tank said the financial burden of rising interest costs affects not only individuals but also the country’s business climate.
“Growing interest costs as a percentage of the economy could lead to a vicious cycle where more revenue is required to finance government debt, leaving less resources for the private sector,” the study said.
“This could also raise the spectre of tax increases to finance the increased debt burden, which could undermine investor confidence.”
