Federal Interest Payments Forecast to Hit $70 Billion by 2029: Budget Office

A magnifying glass enlarges the holographic image of Parliament Hill's Peace Tower on a 20 dollar bill issued by the Bank of Canada, shown in a display case at the Bank of Canada Museum in Ottawa, on Sept. 4, 2024. The Canadian Press/Justin Tang

Interest payments on Canada’s federal debt are expected to reach $69.9 billion by 2029, according to the Parliamentary Budget Office (PBO).

“Public debt charges have increased significantly over the last three years due to a substantial increase in the stock of public debt over the course of the pandemic combined with subsequent higher effective interest rates,” said a PBO report released on June 4.

As originally reported by Blacklock’s Reporter, the PBO said that the 2025–26 Main Estimates showed $49.1 billion in spending on servicing public debt, which is a $0.7 billion increase from the 2024–2025 Estimates. However, the report said the effective interest rate is expected to stabilize after 2025, which will slow the growth in public debt charges.

The government is projected to spend more on servicing its debt than on federal health care, at an estimated $64.8 billion, by 2029. Ottawa is projected to spend $103.8 billion on elderly benefits by 2029.

Canada’s federal debt rose by $36.9 billion from the 2023 to the 2024 fiscal year. It now sits at $1.27 trillion.

In 2024, the federal debt ceiling under the Borrowing Authority Act was raised from $1.83 trillion to $2.13 trillion.

The Department of Finance in a May 30, 2024, submission to the Commons finance committee said it expected the national debt to rise above a record $1.8 trillion within a year. “The increase that’s being recommended this year is as a result of total borrowing approaching the $1.831 trillion number,” testified Alexander Bonnyman, director of debt management.

In May 2024, focus group research by the Privy Council found that Canadians were increasingly concerned with overspending by the federal government. “A number also expressed concerns about the national debt and believed that a greater focus needed to be placed on maintaining balanced budgets in order to ensure the debt did not rise further,” said the report “Continuous Qualitative Data Collection Of Canadians’ Views.”

When those Canadians were asked to rate Ottawa’s management of the economy, “a large number felt that the Canadian economy had not been well managed in recent years,” and cited issues such as high interest rates, the rising cost of living, a growing national debt, and continued deficit spending.

“A few believed that the Government of Canada had placed too high a priority on providing financial and/or humanitarian assistance to other countries and felt that it needed to place an increased focus on addressing the economic challenges faced by those living in Canada,” said the report.

“Asked whether they felt the Government of Canada was on the right track when it came to its management of the economy, very few believed that it was.”

The Liberals under Prime Minister Mark Carney are not forecast to balance the budget, with their costed platform released during the election cycle in April showing they would add $225 billion to the federal debt over the next four years. Carney has said he would balance the operating budget by 2028 by separating out what are deemed as government capital investments.

When Carney was asked about this direction, he said the government was taking a “fundamentally different approach,” and that Canada was in the “worst crisis of our lifetimes” due to tariffs by the U.S. government.