Combined Federal-Provincial Debt Projected to Exceed $2.1 Trillion This Fiscal Year: Study

The Canadian flag flies near the Peace Tower on Parliament Hill in Ottawa on June 17, 2020. (Adrian Wyld/The Canadian Press)

Canada’s combined federal and provincial net debt is expected to exceed $2.1 trillion in the 2022–2023 fiscal year, which is nearly double what it was 15 years ago, according to a think tank report.

“Budget deficits and increasing debt have become serious fiscal challenges facing the federal and many provincial governments recently,” said the report authored by Jake Fuss, associate director of fiscal studies at the Fraser Institute.

“Since 2007/08, combined federal and provincial net debt (inflation-adjusted) has roughly doubled from $1.1 trillion to a projected $2.1 trillion in 2022/23.”

Fuss said that between the pre-pandemic 2019–2020 fiscal year and the 2022–2023 fiscal year, the combined federal-provincial debt-to-gross-domestic-product (GDP) ratio is expected to grow from around 66 percent to nearly 75 percent.

“Moreover, the federal and provincial governments are on track to have collectively accumulated $395.9 billion (inflation-adjusted) in total net debt between 2019/20 and 2022/23, an increase of 23.4%,” he said.

Nova Scotia has a combined federal-provincial debt-to-GDP ratio of nearly 93 percent, ranking it highest in the category among all provinces.

In terms of combined provincial-federal debt per person, Newfoundland and Labrador’s rate of over $64,500 ranks the highest among provinces, while Ontario’s rate of nearly $60,000 per person follows close behind.

Alberta ranked the lowest among all provinces in both categories, with a combined federal-provincial debt-to-GDP ratio of about 44 percent and a combined debt per person of under $43,000.

“The growth in government debt is not limited to only a few provinces or one level of government,” Fuss wrote, adding that “real debt levels have risen federally and in every province” between 2007 and 2023.

Federal Debt

The new study follows another authored by Fuss and released by the Fraser Institute in July 2022, which found that Canada’s federal debt per person had grown by over 35 percent since the Trudeau government first took office in 2015, bringing it from $34,791 per person to $47,070, inflation-adjusted.

It also found that Prime Minister Justin Trudeau has accumulated the third-highest federal debt during his term out of all prime ministers since World War II.

“While some emergency spending for COVID was necessary, the significant increase in federal debt in recent years means more tax dollars will go towards paying interest and future generations are on the hook for today’s spending,” Fuss wrote.

Parliamentary Budget Officer (PBO) Yves Giroux wrote in a November 2022 report that federal debt charges are expected to hit $53 billion by 2024 and that Canada’s debt service ratio, which is public debt charges relative to tax revenues, is projected to top 14 percent in the same year.

“Public debt charges are $5.6 billion higher per year, on average, over 2023-24 to 2027-28,” Giroux wrote in his “Risk Scenario Analysis” report.

Using data from the PBO’s office, the Canadian Taxpayers Federation found in August that the federal government will not likely balance the budget for at least 20 years, and only if granted a generous forecast.

Andrew Chen and Isaac Teo contributed to this report.