New Fraser Institute findings show debt servicing rivalling health and education budgets
Years of deficit spending across Canada are now translating into a direct hit on household finances, with combined federal and provincial interest charges consuming tens of billions of dollars that could otherwise fund health care, education or tax relief.
According to a new study from the Fraser Institute, taxpayers nationwide will collectively cover $94.4 billion in interest costs on federal and provincial debt during 2025/26. Per person, that burden ranges from $1,845 in Alberta, the lowest in the country, up to $3,348 in Newfoundland and Labrador, the highest. Manitoba follows closely behind at $2,816 per resident.
Federal debt servicing alone is projected to hit $54.0 billion this year. That figure sits just below the $54.7 billion Ottawa is sending to provinces through the Canada Health Transfer, and well above the $38.1 billion earmarked for the Canada Child Benefit and Canada-wide Early Learning and Child Care benefit combined.
Combined federal and provincial interest costs facing Ontarians ($37.1 billion) and Quebecers ($22.1 billion) are nearly matched by what each province plans to spend on K-12 education this year.
"Interest must be paid on government debt, and the more money governments spend on interest payments the less money is available for the programs and services that matter to Canadians," said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author of the report.
The report notes that every province along with the federal government is running a deficit in 2025/26, with no government projecting a return to balance in 2026/27. That continued borrowing means interest costs are likely to keep climbing.
Fuss warned that the consequences extend beyond the immediate budget squeeze.
"Governments across Canada continue to rack up large debts, which impose real costs on Canadians, not only in the form of future higher taxes to repay the debt, but also in high debt interest charges which must be paid by taxpayers."
He added that every dollar diverted to debt servicing is a dollar unavailable elsewhere.
"Money that goes to creditors as interest on government debt is money that is not available for other important priorities."
