Interest payments take more than 10% of federal revenues
Debt interest costs for federal and provincial governments will reach $92.5 billion this year, with Newfoundland and Labrador residents carrying the largest per-person burden at $3,432 and Alberta residents paying the lowest at $1,937, according to the Fraser Institute.
The institute’s Federal and Provincial Debt-Interest Costs for Canadians, 2025 Edition shows that the federal government will spend $53.8 billion servicing its debt in 2024/25, accounting for 10.8% of federal revenues. That figure is larger than planned spending on the Canada Health Transfer ($52.1 billion) and the Canada Child Benefit and Canada-wide Early Learning and Child Care program ($35.1 billion).
Newfoundland and Labrador residents face the steepest cost not only per person but also relative to provincial revenue, with 11.1% of the province’s revenue allocated to interest. Manitoba follows at 10% of revenue, while Ontario and Quebec devote 6.9% and 6.3%, respectively.
Ontario carries the largest combined total of federal and provincial interest at $36.2 billion, close to the province’s planned K–12 education spending of $38.4 billion. Quebec’s combined $21.8 billion in interest costs approaches its $23 billion budget for primary and secondary education.
In British Columbia, the combined $11.8 billion in interest exceeds the $10.8 billion allocated to social services. Alberta’s $9.5 billion combined bill is in line with the province’s spending on K–12 education.
“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 Canadian governments’ net debt has steadily increased since the 2008/09 recession, with combined federal and provincial net debt projected to reach $2.3 trillion this fiscal year. The rise in interest costs has been accelerated by the Bank of Canada’s rate increases in 2022 and 2023.
Local government interest costs are not included in the $92.5 billion total. When those costs, estimated at $3.5 billion in 2023/24, are factored in, total government interest payments exceed $100 billion—more than Canada’s $91.6 billion in public K–12 education spending in the most recent year of available data.
“Governments across Canada continue to rack up large debts, which impose real costs on Canadians,” said Tegan Hill, the institute’s director of Alberta policy studies and a co-author of the report.
The study indicates that debt servicing now represents a significant portion of federal and provincial budgets, diverting revenue that could otherwise be allocated to health care, education, or tax relief.
