A new report is sounding the alarm about rising government debt levels in Canada.
The Fraser Institute’s Cost of Government Debt in Canada study, released on Tuesday, suggests provincial and federal government debt in Canada is set to top $1.3 trillion in 2016.
According to the right-leaning think-tank, the combined total debt is equivalent to every Canadian man, woman and child owing $35,827.
“Whether you’re talking about a household or a government, when you take on debt, you have to pay interest,” said Charles Lammam, director of fiscal studies at the Fraser Institute and study co-author. “For governments, that leaves less money for other priorities such as health care, education or even tax relief.”
The study suggests that Canadian governments (federal, provincial and local) spent $60.8 billion on debt interest payments in 2014/15, and that the federal government is currently paying $25.9 billion (or 9.0 per cent of total revenue) in debt interest payments.
“This year’s round of federal and provincial budgets is an opportunity for governments to take meaningful action to reverse an eight-year trend of persistent deficits and growing debt,” suggested Lammam in a news release. “Governments have been borrowing at historically low interest rates so if interest rates rise, the cost of carrying debt will increase and even more money will have to be re-directed to debt servicing costs.”
According to the study, provincial debt in Ontario is expected to reach $298 billion in 2015/16. “That level of debt will result in annual debt interest payments of $11.3 billion (or 9.0 per cent of total revenue), eclipsing the entire budget for the Ministry of Community and Social Services ($11.1 billion) and approaching the province’s total infrastructure spending ($11.9 billion),” said the Fraser Institute.
In Alberta, provincial debt interest payments in 2015/2016 are expected to reach $778 million, about 1.8 per cent of the province’s revenue.
In Newfoundland and Labrador meanwhile, provincial debt interest payments in 2015/2016 are expected to reach $888 million, which is about 12.7 per cent of provincial revenue.
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