Canadians Projected to Pay More Than $1,750 per Person on Government Debt in 2024

Commuters cross Bay Street in Toronto's financial district in a file photo. (The Canadian Press/Graeme Roy)

Canadians will shell out more than $1,750 per person on government debt interest this year, for a total of nearly $82 billion coast-to-coast, according to a newly released report.

The $81.8 billion combined debt between the provinces and federal government comes at a time when interest rates have been on the upswing, according to a new study published by the Fraser Institute.

“Should interest rates rise more in the future, the cost of borrowing would increase over time,” the report from the think-tank noted. “Under those circumstances, even more resources would need to be directed toward interest payments for governments with high debt levels.”

The federal government’s portion of the debt comes in at $46.5 billion this year—totalling 10.2 percent of federal revenues, the study said. That means Ottawa is currently spending more than 10 cents of every tax dollar it collects on interest payments.

To illustrate the point made in the report, the government will spend $15.3 billion more on interest payments in this fiscal year than the roughly $31.2 billion it hands out in child-care benefits.

“Interest must be paid on government debt, and the more money governments spend on interest payments the less money is available for the programs and services that matter to Canadians,” Fraser Institute director of fiscal studies Jake Fuss said in a Jan. 25 press release.

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Among the provinces, Newfoundland and Labrador has the highest debt-to-revenue ratio, forcing it to spend 10.6 percent of every cent it makes on interest payments.

Manitoba comes in second, spending 10.1 percent of provincial revenues on interest followed by Ontario and Quebec at 6.7 percent and 6.6 percent respectively. P.E.I. sits at 5.5 percent, Nova Scotia at 5.3 percent, and New Brunswick at 4.4 percent while the western provinces—Saskatchewan, Alberta, and B.C.—all come in at 4.2 percent.

Federal-Provincial Debt

The combined $81.8 billion federal-provincial debt is not distributed evenly across the provinces. Federal interest payments were allocated to the provinces based on their share of the total Canadian population over a five-year period.

Residents in Newfoundland and Labrador face a $3,225 combined per-person federal-provincial interest payment, the highest of all provinces.

Manitobans face the next highest combined interest payments at $2,728 per person followed by Quebec at $2,323, while Ontario and P.E.I. can each expect to pay $2,048 per person.

Nova Scotia residents’ rate will be $1,931 per person, followed by Saskatchewan at $1,880, Alberta at $1,854, and New Brunswick at $1,846.

British Columbians face the lowest per-person interest costs in the country at $1,764.

“Even before the COVID-19 pandemic and recession, governments across Canada and in Ottawa were racking up large debts, and this debt imposes real costs on Canadian taxpayers in the form of interest payments,” Mr. Fuss said.

Although there was a significant rise in debt levels in 2020 associated with pandemic spending, debt has been a problem in Canada since the 2008-2009 recession, the study said. Ottawa has chosen to run deficits since the onset of the global financial crisis of 2007-2008, resulting in an 85 percent increase in Canada’s combined public debt.

The combined federal and provincial debt will create “serious fiscal challenges for Ottawa and provincial governments in the years ahead,” Mr. Fuss said in a separate press release on a coinciding report. “It’s important for Canadians to understand the magnitude of the country’s combined government debt because deficits and debt today result in higher taxes in the future.”