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Canadians will pay up to $3,348 this year on government debt interest, study finds
A new study from the Fraser Institute says that every Canadian this year will pay hundreds or even thousands of dollars to service the interest on federal and provincial debt, with Newfoundlanders and Manitobans paying the most, and Albertans the least.
“For more than a decade, deficit spending and growing government debt have become a trend for many Canadian governments,” says the report , authored by Jake Fuss, director of Fiscal Studies at the Fraser Institute. “In 2025/26, the federal government and all ten provinces are projected to record deficits.”
It notes that combined federal and provincial net debt is expected to reach a record high $2.4 trillion in 2025/26. “It is expected this trend will continue for the foreseeable future, as every province and the federal government project that they will continue running deficits in 2026/27.”
This amounts to an expected $94.4 billion spent on interest payments in 2025/26 by the federal and provincial governments.
“Residents in Newfoundland & Labrador face by far the highest combined federal-provincial interest payments per person: $3,348,” the report notes. “Manitoba is the next highest at $2,816 per person.” The lowest amount is in Alberta, where it amounts to $1,845.
More than half of those costs come from the federal government, which will spend a projected $54 billion on debt servicing charges in 2025/26, roughly equivalent to the $54.7 billion the government will spend on the Canada Health Transfer, and far more than it spends on childcare benefits ($38.1 billion).
Fuss told National Post that those kinds of comparisons are useful to illustrate to Canadians the size of the problem of government debt payments.
“If we’re spending this money on interest costs, that’s money that’s not going towards those programs you care about, like education, health care, pensions, things like that,” he said. “And ultimately we are basically spending the same amount or more on interest costs than we are spending on K-to-12 education, for instance.”
The report notes specifics for several provinces. In Ontario, where every citizen will pay $2,282 to cover debt interest payments, the provincial government is projected to spend $16 billion on interest costs.
“This is $2 billion more than what the province spends on post-secondary education,” the report notes.
It adds: “According to the 2026 Ontario budget, interest costs are projected to grow at an average annual rate of 7.1 per cent between 2025/26 and 2028/29. In contrast, the annual growth rate on spending for health care is expected to be 2.9 per cent. Put simply, interest costs are one of the fastest growing line items in the Ontario budget.”
Meanwhile, B.C. is expected to spend $5 billion on provincial interest payments in 2025/26, more than the $4.5 billion it spends on child welfare. And in Alberta, spending on provincial interest payments ($2.9 billion) is nearly twice the amount the province expects to spend on the Department of Children and Family Services ($1.6 billion).
Fuss said: “I think that probably is going to open a lot of eyes for people, because you know when you’re spending that amount of money on interest costs, that’s money that’s not going elsewhere.”
As to what can be done, Fuss said it’s a short answer, though not a simple one.
“The first thing they’re going to have to do is control spending,” he said. “And that’s basically the case in every single province, at every level of government in Canada, regardless of political stripe right now. We’re seeing governments consistently increase spending at an unsustainable rate, and they’re actually increasing their revenue over time, but it’s not increasing as fast as they’re spending.”
The Fraser Institute puts out a similar report annually , and while this year actually saw a slight decrease in per capita debt expenses — Newfoundland for instance fell to $3,348 from $3,432 — the long-term trend is a continual climb.
“Some governments have actually received good news on the revenue front, so they actually received a little bit more revenue than they were anticipating in some of their budgets in the last couple of years,” said Fuss.
But, he added: “That makes it more paramount that they make those changes, because if you keep getting this kind of unexpected good news, which makes it seem like the problem isn’t as bad as it actually is, then you’re probably going to continue to kick the can down the road and say, ‘oh, we’re not actually doing all that bad right now. We can continue to borrow and there’ll be no consequences.’
“Well, we know eventually you do get to those consequences.”
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