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).
In the 1983–1989 era, a median Canadian home cost roughly three times the median household income. Today it costs eight times that much. That ratio has deteriorated in every single era without exception, under every government of every partisan stripe. Housing affordability is not a recent problem. It is a 40-year process of slow exclusion from the primary vehicle through which ordinary Canadian families built intergenerational wealth.
The real GDP per capita figure tells an equally sobering story. Canada grew at roughly 2.8 percent per capita in the 1980s recovery. That figure has declined in every subsequent era, reaching an almost negligible 0.3 percent in 2020–2025—and that number is itself flattering, distorted upward by the COVID-19 recovery bounce and by the fact that Canada’s rapid population growth through immigration diluted per capita output even as headline GDP appeared to grow. In plain terms, the average Canadian got significantly poorer on a per-person basis in the most recent era even as the economy appeared to expand.
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Budget deficits and increasing debt have become serious fiscal challenges facing the federal and many provincial governments. Since 2007/08, combined federal and provincial net debt (inflation-adjusted) has nearly doubled from $1.24 trillion to a projected $2.44 trillion in 2025/26.
Between 2019/20 (the last year before COVID) and 2025/26, the combined federal-provincial debt-to-GDP ratio is expected to grow from 65.9 percent to 75.4 percent. Moreover, the federal and provincial governments are on track to have collectively accumulated $603.7 billion (inflation-adjusted) in total net debt between 2019/20 and 2025/26, an increase of 32.8 percent.
Among the provinces, Manitoba has the highest combined federal-provincial debt-to-GDP ratio (91.3 percent), while Alberta has the lowest (43.4 percent). Newfoundland and Labrador has the highest combined debt per person ($71,611), followed by Ontario ($63,574) and Quebec ($63,488). In contrast, Alberta has the lowest debt per person in the country with $42,368.
Interest payments are a major consequence of debt accumulation. Governments must make interest payments on their debt similar to households that must pay interest on borrowing related to mortgages, vehicles, or credit card spending. Revenues directed towards interest payments mean that in the future there will be less money available for tax cuts or government programs such as health care, education, and social services.
The federal and provincial governments must develop long-term plans to meaningfully address the growing debt problem in Canada.
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According to the MEI, the gap between Canadian investment abroad and foreign investment in Canada was roughly 14% in 2014. In other words, Canadians invested slightly more abroad that year compared to what foreigners invested in Canada. By 2025, that gap had more than doubled. Canadian investment abroad is now roughly 33% more than foreign investment here in Canada.
Canadian firms and pension funds investing abroad can be a sign of global competitiveness.
(Sidebar: you
don’t say.)
But it raises important questions: Why are returns consistently perceived to be stronger abroad than they are in Canada? Why are Canadian companies investing abroad so much more than foreign companies are investing here?
Ultimately, it’s a question of public policy. Companies don’t have the confidence to invest in Canada because of high taxes, overregulation, and deteriorating government finances. If public policies don’t change soon, the gap between Canadian investment abroad and foreign investment in Canada will only continue to grow.
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The report from the Aristotle Foundation published on June 16 highlights the scale of government financial transfers to indigenous communities in B.C. between fiscal years 2001-2002 and 2024-2025. It determined that, after adjusting for inflation, the average annual amount equalled $1.2 billion annually for a total of $27.2 billion.
The largest transfers were from the departments of Crown-Indigenous Relations and Indigenous Services Canada, which totalled $24.6 billion, according to the report. Next was the department of health at $1.3 billion, followed by the department of Employment and Social Development Canada at $746.3 million. The smallest transfer was reported by the ministry of justice, which contributed $11.4 million during the entire reporting period.
The figures used in the report were compiled using federal data from Indigenous Services Canada and its predecessor departments.
The data also showed that federal funding for B.C. First Nations experienced distinct phases of growth, dropping in 2004-2005, just prior to the Liberal Party losing the 2006 federal election to the Conservatives, before rebounding to $917 million.
Transfers averaged just over $1 billion annually from 2006 to 2015 under Stephen Harper’s Tory government but saw a substantial increase after Justin Trudeau’s Liberals assumed office, the report found. The transfers averaged more than $1.4 billion over nine years under the Trudeau Liberals, but reached a peak of $2.74 billion in the 2022-2023 fiscal year, representing a 240 percent increase compared to the average annual transfer over the previous 20 years.
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