Ontario’s debt expected to balloon by $50 billion in next 4 years

Provincial financial watchdog warns that expanding debt could cause problems if interest rates increase

Ontario’s debt expected to balloon by $50 billion in next 4 years
Ontario’s debt is expected to grow by $50 billion in the next four years, according to a Financial Post report.

The province’s financial accountability officer, Stephen LeClair, said he expects Ontario’s net debt to balloon from its current price tag of about $300 billion to $350 billion by the 2020.2021 fiscal year, according to the Post. Most of the borrowing will fund the government’s 12-year, $160 billion infrastructure plan.

“In absolute terms, Ontario’s net debt was the highest among Canadian provinces at $296.1 billion on March 31, 2016,” LeClair said. Quebec remains more indebted in relative terms, he noted. “Ontario’s net debt per person was $20,806 in 2014-15, compared to $22,591 in Quebec.

“In contrast, net debt per person was $8,387 in British Columbia, and net assets per person were $3,168 per person in Alberta in 2014-15,” LeClair added.

Ontario’s debt load – 38% of which will mature by 2020 – could be risky if interest rates rise, the Post reported.

“According to the 2016 budget, a one percentage point increase (e.g. from 3.6 to 4.%) in interest rates would increase interest payments by about $350 million in 2016-17, more than the budgets of the Ministries of Labour and Aboriginal Affairs,” LeClair said.

LeClair also believes Ontario will fall into deficit by 2018/19 – just a year after Premier Kathleen Wynne has promised to balance the budget, the Post reported.

But Finance Minister Charles Sousa defended the province’s pricey infrastructure plan, according to the Post.

“These capital investments spur economic growth, which will increase provincial GDP growth,” Sousa said in a statement. “The resulting increase in GDP growth will improve the net debt-to-GDP ratio, which has peaked and is beginning to decline.”

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