The latest federal budget was a record breaking document. First, it was the longest period between budgets in Canadian history at 762 days. Second, it projects the highest level of federal debt in Canadian history, a number which will reach $1.3 trillion by 2022. Additionally, the annual deficit in 2020-2021 will have been the largest since Canada began keeping track in 1966 at $354.2 billion.
This analysis by the Montreal Economic Institute lays out the impact of the debt as servicing costs will soar:
“Debt servicing costs, also known as public debt charges, are projected to reach $22.1 billion in 2021-2022, gobbling up 6 percent of total federal revenue. This ratio is projected to climb to 9 percent in 2025-2026, meaning that for every dollar in revenue collected by the government, nearly 10 cents will be surrendered to paying interest on the federal debt.
Moreover, this year’s budget projects that interest payments on the debt will grow by 78 percent between 2021-2022 and 2025-2026.”
Debt servicing costs are an issue in that they ultimately increase the load on taxpayers down the road, the authors write, and eventually preclude us from investing in programs that tangibly help those who desperately need it, such as mental health wellness, homelessness, and supporting veterans. You cannot defer costs forever and eventually the bill comes due and hard choices must be made.
