Report says federal and provincial borrowing has climbed to $2.44 trillion, leaving the average Canadian on the hook for tens of thousands of dollars
Canada's federal and provincial governments have accumulated debt at a pace that has nearly erased a decade of fiscal discipline, with their combined net obligations projected to reach $2.44 trillion in the current fiscal year; almost double the $1.24 trillion recorded in 2007/08, according to a new report from the Fraser Institute.
"Government debt — federally and in most provinces — has grown substantially over the past 18 years, since just before the 2008 financial crisis, creating serious fiscal challenges for Ottawa and provincial governments in the years ahead," said Jake Fuss, director of fiscal studies at the Fraser Institute and author of the 2026 edition of the think tank's annual debt tracker.
The report measures net debt and finds that the post-financial-crisis era marked a decisive break from the balanced-budget norms that took hold in the mid-1990s and held through the late 2000s. What followed was nearly two decades of deficit spending at every level of government, punctuated by a sharp COVID-era surge that added hundreds of billions in obligations almost overnight.
Between 2019/20, the last fiscal year before COVID hit, and 2025/26, inflation-adjusted net debt across all governments is on track to climb by $603.7 billion, a 32.8% increase. Over that same window, the combined federal-provincial debt-to-GDP ratio is projected to widen from 65.9% to 75.4%, up from 53.2% back in 2007/08.
Ottawa's net debt is expected to reach $1.47 trillion in 2025/26, up $712.7 billion in real terms from 2007/08, a 93.7% increase.
That expansion comes after the federal government had reduced its inflation-adjusted debt by $364.5 billion in the years between 1996/97 and 2007/08, a fiscal achievement that was subsequently more than undone. Looking further out, the federal spring economic update projects Ottawa's net debt will climb another 26.5% through 2030/31, reaching $1.86 trillion.
Provincial debt
The provinces are not far behind. All ten are currently projecting operating deficits in both 2025/26 and 2026/27. Eight of them — Alberta, British Columbia, Saskatchewan, Quebec, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island — are forecast to remain in deficit each year through 2028/29.
Alberta presents perhaps the sharpest turnaround in the provincial landscape. Once the only province with a net financial asset position, it has swung dramatically to the red side of the ledger since 2008/09. Despite posting four consecutive budget surpluses between 2021/22 and 2024/25, the province now projects deficits through 2028/29.
Alberta saw the largest percentage-point increase in its debt-to-GDP ratio of any province, swinging from -13.4% to 8.1%, though its provincial debt as a share of the economy still remains the lowest in the country.
When federal obligations are allocated to each province on a per-capita basis, the disparities are pronounced. Newfoundland & Labrador carries the heaviest per-person burden at $71,611, followed by Ontario at $63,574 and Quebec at $63,488. Alberta, despite its recent deterioration, still has the lowest combined debt per person at $42,368.
Manitoba, meanwhile, carries the most troubling debt-to-GDP ratio when federal and provincial obligations are combined, at 91.3% of its economy. Newfoundland and Labrador follows at 89.7%.
Public services
The report draws a direct line between debt accumulation and consequences for public services and private investment. Revenues consumed by interest payments are unavailable for health care, education, and social services. Rising long-term rates — a natural byproduct of expanding government borrowing — also push up costs in the private sector, discouraging capital investment and constraining productivity growth.
"It's important for Canadians to understand the magnitude of the country's federal and provincial government debt because deficits and debt today mean higher taxes in the future," Fuss said.
The report stops short of prescribing specific fiscal targets but argues that the post-COVID period removes the emergency rationale that governments used to justify sustained deficit spending. The window for course correction, it suggests, is now open and narrowing.
