How much interest on government debt could cost Canadians this year
The interest on the Government of Canada’s debt will cost each Canadian thousands of dollars this year, according to a new study.
Public policy think-tank the Fraser Institute found that the combined debt interest payments for both the federal and provincial governments in Canada will cost $92.5 billion in 2024/2025. That’s between $1,937 and $3,432 per Canadian, depending on the province.
This comes as governments in Canada have trended towards deficit spending and growing government debt in recent years.
“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,” said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author of the study.
According to the report, Ottawa will spend $53.8 billion on debt servicing charges in 2024/2025, which is significantly more than what the government expects to spend on the Canada Child Benefit and Canada-wide Early Learning and Child Care benefit ($35.1 billion). It also costs more than the Canada Health Transfer payments to the provinces ($52.1 billion).
Fraser Institute
When it comes to provincial government debt in Canada, Newfoundland and Labrador’s combined federal and provincial interest costs are the highest in the country at $3,432 per person. The next highest is Manitoba, with a combined interest debt costing its residents $2,868 each.
British Columbia and Ontario are close behind at $2,242 and $2,064 per person, respectively. Alberta’s combined federal and provincial interest costs are the lowest in the country at $1,937 per person.
The study added that the total expenditures on interest costs for Ontario ($38.4 billion), Quebec ($23.0 billion), and Alberta ($9.5 billion) are roughly equivalent to expected spending on K-12 education in their respective provinces this year.
Fraser Institute
“Governments across Canada continue to rack up large debts, which impose real costs on Canadians,” said Tegan Hill, study co-author and director of Alberta Policy Studies for the Institute.
“Interest payments across the country are substantial, and money that goes to creditors is money that is not available for other important priorities.”