Canadian public debt
[1]: 23 Government gross debt consists of liabilities that are a financial claim that requires payment of interest and/or principal in future.
[7] While the federal government's fiscal strategy was assessed as sustainable over the long-term, this was not the case for the subnational sector as a whole, according to a 2022 Parliamentary Budget Officer report.
Examples of difficult-to-value assets include nonmarketable equity investments, and loans that might never be repaid if the loan-receiving firms become insolvent.
[17] Overview During the Great Depression—a severe global economic depression from 1929 to 1939—the Canadian consolidated general government gross debt as a share of GDP exceeded 100%.
As a consequence, by the third quarter of 2020, the ratio of all government debt securities liabilities to GDP jumped to 95.3%, surpassing the 1995 peak of 93.7%.
[20] In 1990, then Prime Minister Brian Mulroney introduced a budget that included a two-year freeze on health care and post-secondary education transfers to the provinces, the elimination of cash grants to businesses, and a 5% cap on spending increases for foreign aid and the military.
"[19] When Jean Chretien became Prime Minister in November 1993, he undertook a fiscal consolidation that was achieved mainly by big spending reductions.
[27] During the period that included the 2008 financial crisis and the Great Recession, Stephen Harper's CPC government reported six straight years of budget deficits.
[29] During 2020, the first year of the historic COVID-19 pandemic, the sum of all government liabilities (gross debt) reached $2,852 billion (129.2% as a ratio of GDP).
[32] Interest payments on debt represented approximately 1% of GDP early in the pandemic, compared to 6% in 1995, when it reached its highest level.
[32] For the fiscal year ending 31 March 2022, interest expense on government debt liabilities was $64.6 billion, or 6.8% of every dollar of revenue.
[3] The total financial liabilities or gross debt of the Canadian consolidated provincial, territorial and local governments (PTLG) was $1,460 billion in 2021 (the fiscal year ending 31 March 2022), as shown in the table below.
The value of provincial outstanding debt securities liabilities expressed as a percentage of GDP was lowest for British Columbia (26.1%) and highest for Manitoba (71.4%) in 2021.
"[34] These units include the "provincial government, health and social service institutions, universities and colleges, municipalities and other local public administrations, and school boards".
By contrast, debt measured on a national accounts basis (employed in the table above) follows an internationally agreed standard, in order to facilitate comparisons across countries and provinces.
"[43]: 25 Major risk factors that can increase government debt include slowing economic growth, rising interest rates, and a decline in the value of the Canadian dollar.
[44]: 49 However, economist Don Drummond, a former Finance Department assistant deputy minister, said in October 2020 that the interest rate on public debt would certainly rise from the level at that time, which was by far the lowest in post-war experience.
[45] As of 2019, the International Monetary Fund views exchange rate risk as low for Canada because 90% of general government outstanding marketable debt instruments are denominated in Canadian dollars.
[47] Credit rating agency Fitch said it expects the federal government to provide a province with access to debt markets, as it did early in the coronavirus pandemic.
These rose sharply during the COVID-19 pandemic (to 81% of GDP in 2021 from 64% in 2019), spurred by support measures such as loans to businesses and tax deferrals (accounts receivable).
[53]: 39 Canada's general government gross debt includes substantial accounts payable (around 18% of GDP at end-2021), which many advanced countries do not report.
[53]: 39 The IMF's general government debt calculation excludes unfunded pension liabilities, to maintain comparability with other countries.
[53]: 40 The general government gross debt to GDP ratio for countries the IMF classifies as Advanced economies that have a population of at least 5 million is shown in the table below.
General Government Gross Debt, Percent of GDP Source: International Monetary Fund, World Economic Outlook Database, April 2023.
Numbers are IMF staff estimates in 2022 for Australia, Austria, Belgium, Czech Republic, Denmark, Finland, France, Greece, Ireland, Israel, Japan, Korea, Netherlands, New Zealand, Norway, Slovak Republic, Spain, Sweden, Switzerland, and the United States; and in 2021 for Israel and New Zealand.
In its staff report released in 2019, before the COVID-19 pandemic, the International Monetary Fund says the Canadian federal government experienced favorable economic conditions since the 2018 budget that led to sizeable windfall gains: higher than anticipated revenue collections, lower transfers to households, and lower projected interest rates.
