Canada’s public debt – and the cost of maintaining it – is increasing so quickly that it is now costing $2,000 per Canadian, per year just to cover the interest charges.
According to a new analysis published by the Fraser Institute, the cost of servicing Canada’s combined provincial and federal debt hit an unprecedented $92.5 billion in the 2024/2025 fiscal year.
This makes debt servicing one of the fastest growing shares of Canadian government spending. And with large deficits and high interest rates set to continue into the foreseeable future, that trend is set to continue.
Of every tax dollar collected in the 2024/2025 fiscal year, the Fraser Institute found that eight cents of it was spent merely to pay the interest charges on public debt, be it the $1.3 trillion in debt held by the federal government, or the $1.1 trillion in debt held collectively by all 10 provinces.
The situation was most acute for taxpayers in Newfoundland and Labrador. Like every other Canadian, Newfoundlanders saw 10 cents of every federal dollar diverted into debt servicing. For every tax dollar they sent to the provincial government, meanwhile, 11 cents were immediately consumed by interest charges.
On average, Canadian debt servicing costs now consume more government spending than the combined annual cost of K-12 education. The debt costs are also
what Canada currently spends on national defence.
In 2024/25, the federal government alone spent a record $53.8 billion on debt interest. This was more even than what is traditionally one of the largest single chunks of federal spending; the Canada Health Transfer (CHT). In that same fiscal year, the cost of the CHT only hit $52.1 billion.
Even in B.C., which maintains a relatively low public debt burden, taxpayers are now paying more to maintain public debt than they are on infrastructure upgrades. In the 2024/2025 fiscal year, the province of B.C.
on new hospitals, schools, transit and public housing.
That’s slightly less than the estimated $11.6 billion in B.C. tax dollars that got consumed by federal and provincial debt payments in the same period.
The cost of debt servicing began to increase dramatically in the immediate wake of the COVID-19 pandemic, when interest rate hikes had an outsized impact on Canadian governments.
In 2023, stats showed that Ottawa was suddenly
on interest charges compared to the year prior. By the next year, federal debt costs had surged so high that
they cancelled out the combined revenue for the GST.
The federal government collected about $54 billion in GST revenue, and paid out about $54 billion in interest charges.
Just five years ago, in 2020, the Fraser Institute’s annual tally of Canada’s public debt servicing costs arrived at a figure of $54.8 billion, as compared to the $92.5 billion in their most recent tally. At the time, the combined provincial-federal debt stood at just $1.5 trillion, as compared to the $2.3 trillion of today.
That debt burden is only set to increase, with both federal and provincial governments dramatically hiking deficits for the foreseeable future.
The federal government alone is
planning to accumulate $225 billion in new debt
over the next four years. In B.C., provincial debt has risen by 50 per cent in just the last two years. Even Alberta, which was the only province posting budget surpluses as recently as last year, has
now veered back into deficit territory.
Canada generally still comes out in good shape when its federal debt load is compared to that of peer countries such as France or the U.K. The Government of Canada often boasts in official literature that “
Canada has the lowest net debt in the G7
.”
However, Canada is somewhat unique in allowing high levels of public debt to be accumulated at the subnational level. In the U.K., for instance, almost all public debt is carried by the national government, with borrowing kept extremely limited among subnational governments.
This is why, when Canada’s various provincial and federal liabilities are lumped together as “general government” debt, the country quickly ranks among the most indebted on earth.
The most recent IMF ranking of countries by “general government debt” had Canada at 107 per cent of GDP, higher than the U.K. (101.1) and Spain (105.03), and rapidly approaching the famously indebted French (110.6).
