Rising Debt Burden
Canadians to Pay Up to $3,348 Annually on Government Debt Interest, Fraser Institute Study Reveals
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Every Canadian will pay up to $3,348 this year just to cover interest on government debt, according to a new study by Fraser Institute. That money goes straight to bondholders — not to hospitals, schools, or tax relief.
The report found that combined federal and provincial net debt is on track to hit a record $2.4 trillion by 2025/26. That year, governments will spend a combined $94.4 billion on interest alone — more than Canada spends on healthcare transfers and childcare combined, The Province reported.
Federal Debt Interest Now Rivals the Healthcare Budget
The federal government will spend $54 billion on debt interest this year, according to Fraser Institute. That nearly matches the $52.1 billion it sends to provinces through the Canada Health Transfer. Put another way: Ottawa is spending almost as much paying off bankers as it is funding doctors and hospitals.
The federal government will also spend $38.1 billion on childcare benefits this year. Together, those two programs — healthcare transfers and childcare — add up to about $90 billion. Debt interest, at $54 billion, is closing in fast. Jake Fuss, the study's lead author, put it bluntly: "Interest payments are money that can't be used for anything else — it's not going to healthcare, education, or tax cuts."
Newfoundlanders Bear the Heaviest Per-Person Debt Burden
Not all Canadians feel this equally. Residents of Newfoundland and Labrador face the steepest bill: $3,348 per person this year, according to Fraser Institute. Manitobans pay $2,282 per person. Saskatchewan residents owe $2,130. Ontario residents pay $2,126 per person, with the province spending $16 billion on interest in total.
Albertans get off lightest, at $1,503 per person — less than half of what Newfoundlanders pay. The gap shows how differently provinces have managed their books. Alberta has historically carried less debt, while Atlantic Canada and Ontario have borrowed more heavily over the past decade, Sault Star noted.
A Decade of Deficits and Rising Rates Created This Crisis
This didn't happen overnight. The federal government ran deficits of $14 billion to $19 billion per year from 2015 to 2019. Then COVID-19 hit. The 2020/21 deficit alone was $327.7 billion — the largest in Canadian history. That borrowing piled on top of existing debt.
Then came the interest rate shock. The Bank of Canada raised its overnight rate from 0.25% in March 2022 to 5.00% by July 2023. That made all new and rolling government debt far more expensive to service. The result: interest costs ballooned just as the debt pile hit record highs — a painful double hit for taxpayers, Brantford Expositor reported.
Crowded-Out Services and Generational Debt Left Behind
As interest costs climb toward $94.4 billion by 2025/26, governments will have less room to spend on anything else. Analysts call this "fiscal suffocation" — when debt obligations legally take priority over public services. Healthcare wait times, infrastructure, and social programs could all feel the squeeze, according to Cold Lake Sun.
The Fraser Institute also warns of a generational problem. Today's young Canadians did not benefit from most of the spending that created this debt. But they will spend years paying interest on it. Franco Terrazzano of the Canadian Taxpayers Federation called it "a massive waste of taxpayers' money," adding that the government is "spending more on interest than it's sending to the provinces for healthcare."
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