Canada's public debt is rising rapidly, leading to significant financial burdens for taxpayers. A recent analysis by the Fraser Institute reveals that the cost of servicing the combined federal and provincial debt has reached a staggering $92.5 billion for the 2024/2025 fiscal year. This translates to approximately $2,000 per Canadian annually just to cover interest charges.

The analysis indicates that debt servicing is one of the fastest-growing components of government spending in Canada. In the upcoming fiscal year, eight cents of every tax dollar collected will go toward paying interest on public debt, which includes $1.3 trillion owed by the federal government and $1.1 trillion owed by the provinces.

Newfoundland and Labrador faces the most severe impact, with taxpayers there seeing 10 cents of every federal tax dollar and 11 cents of every provincial tax dollar consumed by interest payments. On average, the cost of servicing debt now exceeds the total annual expenditure on K-12 education and is nearly three times the amount spent on national defense.

In the 2024/2025 fiscal year, the federal government is expected to spend a record $53.8 billion on interest, surpassing the Canada Health Transfer, which is projected at $52.1 billion. Even in British Columbia, where public debt levels are relatively low, taxpayers are contributing more to debt servicing than to infrastructure projects. B.C. is set to spend $10.4 billion on new hospitals, schools, and transit, while debt payments are estimated at $11.6 billion.

The surge in debt servicing costs began after the COVID-19 pandemic, with interest rate hikes significantly affecting government finances. In 2023, Ottawa's interest payments increased by 37% compared to the previous year. By 2024, federal interest costs equaled the total revenue from the Goods and Services Tax (GST), with both figures around $54 billion.

Five years ago, in 2020, the Fraser Institute reported public debt servicing costs at $54.8 billion, with a combined federal and provincial debt of $1.5 trillion. Today, that debt has ballooned to $2.3 trillion, and the burden is expected to grow as both federal and provincial governments plan to increase deficits. The federal government alone anticipates adding $225 billion in new debt over the next four years.

While Canada maintains a relatively low federal debt compared to other G7 nations, it is unique in allowing high levels of public debt at the provincial level. In contrast, countries like the U.K. primarily carry public debt at the national level, with strict borrowing limits.