How Much Is Canada in Debt in 2024?

Understanding Canada’s national debt in 2024 offers valuable insights into the country’s economic health, fiscal policies, and financial challenges. The national debt represents the cumulative borrowing by both federal and provincial governments to fund various programs, services, and economic initiatives. In recent years, this debt has risen substantially, influenced by pandemic-related expenditures, rising interest rates, and inflation. In this article, we’ll delve into the specifics of Canada’s debt levels, examine the main contributors to this debt, and explore what this means for the nation’s economic future.

Canada’s Total Debt in 2024: A Snapshot

As of 2024, Canada’s total debt—when combining federal and provincial obligations—reaches approximately $2.18 trillion. This figure includes both federal debt and the combined debts of provincial and territorial governments. Canada’s debt-to-GDP ratio, a key measure of debt sustainability, stands at around 76.2%, indicating that the country’s debt is substantial relative to its economic output. For context, the debt-to-GDP ratio was about 65.7% in 2019 before the pandemic began, illustrating a significant rise over recent years.

Breakdown of Federal and Provincial Debts

Federal Debt: The federal debt makes up a considerable portion of the national debt, totaling approximately $1.33 trillion in 2024. This includes debt accumulated from various programs, economic relief measures, and infrastructure investments. The federal government also faces rising interest expenses, with nearly 9.6% of revenue allocated to interest payments due to both increased debt and higher interest rates.
Provincial Debt: Provincial governments contribute significantly to Canada’s overall debt. Some provinces, like Ontario, Quebec, and Newfoundland and Labrador, have substantial per capita debt. Ontario, the most populous province, has a debt that is one of the largest in absolute terms, while Newfoundland and Labrador have the highest per capita debt at over $67,000. Each province’s fiscal situation varies, influenced by local economic conditions, resource dependencies, and spending commitments.

What Drives Canada’s Debt Levels?

Canada’s debt levels in 2024 are the result of a combination of factors, each contributing to the increasing national debt. Here’s a closer look at some of the main contributors:

Pandemic-Related Spending

The COVID-19 pandemic led to unprecedented levels of government spending. Both the federal and provincial governments implemented programs to support individuals, businesses, and healthcare systems during this challenging period. From wage subsidies to business support programs, these measures were essential in stabilizing the economy but added significantly to the national debt. The Canada Emergency Response Benefit (CERB) and other relief initiatives alone cost billions of dollars.

Rising Interest Rates

Interest rates have risen considerably over the past few years. While rates were historically low during the early days of the pandemic, central banks, including the Bank of Canada, have increased rates to combat inflation. For the federal government, this means higher interest costs on its debt. In the first quarter of 2024, interest expenses reached $11.7 billion, marking a 31% increase from the previous year. Provincial governments face similar pressures, with increased portions of their revenue going towards interest payments.

Infrastructure and Social Programs

Canada invests heavily in infrastructure and social programs, which are vital for long-term economic growth and societal well-being. However, these investments require substantial funding. Major projects like public transit expansions, healthcare infrastructure, and educational programs have contributed to increased borrowing, as these are essential but costly initiatives.

Provincial Economic Variability

Each province has unique economic drivers, challenges, and dependencies. For instance, resource-rich provinces like Alberta and Newfoundland and Labrador have been impacted by fluctuations in oil prices, which affect their revenue and borrowing needs. Ontario and Quebec, with diverse economies and large populations, face pressures related to healthcare and infrastructure spending. These regional differences contribute to varying debt levels across provinces.

Debt-to-GDP Ratio and Its Implications

The debt-to-GDP ratio is a critical measure of a country’s debt sustainability. Canada’s ratio of 76.2% in 2024 reflects the country’s ability to handle its debt relative to its economic output. While Canada’s debt-to-GDP ratio is high compared to some other advanced economies, it is still lower than that of countries like Japan and Italy, which have ratios exceeding 100%. Nevertheless, maintaining or lowering this ratio is essential to ensuring long-term economic stability and investor confidence.

A high debt-to-GDP ratio can lead to increased borrowing costs, as lenders may view the country as a higher risk. Additionally, a rising ratio could limit the government’s ability to respond to future economic crises, as more resources would be dedicated to servicing existing debt rather than funding new initiatives.

Interest Payments and Fiscal Impact

Interest payments are becoming an increasingly significant portion of Canada’s budget. The federal government, for instance, spends almost 9.6% of its revenue on interest payments, up from 7.6% in the previous year. This increase results from both higher levels of debt and rising interest rates, which amplify the cost of borrowing. Provincial governments are similarly affected, with some allocating up to 7.1% of revenue to interest payments.

The implications of high interest payments are substantial. Funds that go toward interest cannot be used for essential services like healthcare, education, or infrastructure. This budgetary strain can limit the government’s flexibility and may require difficult trade-offs in future spending.

Comparison to Historical Debt Levels

Canada’s debt in 2024 marks a significant increase from pre-pandemic levels. In the 2019/2020 fiscal year, Canada’s national debt was substantially lower, with a debt-to-GDP ratio of around 65.7%. The pandemic and associated spending pushed this ratio upward, a trend seen in many countries as they grappled with economic disruption.

Compared to historical averages, Canada’s current debt levels are high, but they reflect the extraordinary circumstances of recent years. Historically, Canada has maintained a relatively conservative fiscal policy, but the unique challenges of the past few years have required adjustments.

Future Projections: What Lies Ahead for Canada’s Debt?

Looking forward, Canada’s debt is projected to increase further, with estimates suggesting an 11.9% rise by 2028/2029 if current trends continue. The government faces the challenge of balancing economic recovery and growth with debt reduction. Policymakers will likely need to adopt strategies that promote sustainable growth while managing debt levels, such as increasing productivity, optimizing public spending, and potentially exploring revenue-generating measures.

Some possible approaches to managing debt in the future include:

Reducing Spending on Non-Essential Programs: Focusing on essential programs while reducing spending on less critical initiatives could help reduce budgetary pressures.
Increasing Revenue: Introducing measures to increase tax revenue, such as higher taxes on wealthier individuals or corporations, could provide additional funds for debt repayment.
Promoting Economic Growth: Policies that support economic growth, such as investments in technology and innovation, could increase GDP, thereby reducing the debt-to-GDP ratio.

The Path Forward for Canada’s Debt

Canada’s debt levels in 2024 reflect both recent challenges and long-standing economic choices. While debt levels are high, they are manageable with careful planning and a commitment to sustainable fiscal policies. The federal and provincial governments will need to work collaboratively to ensure that debt does not hinder future growth or compromise essential services. For Canadians, understanding the national debt’s context and implications can provide clarity on the economic landscape and what it means for future fiscal policies.

In summary, while Canada’s debt is substantial, with a debt-to-GDP ratio of 76.2%, strategic management and a focus on economic growth can support the nation’s financial health. As citizens, staying informed about these figures is vital for understanding how fiscal policy decisions today will shape Canada’s economic future.