Canadian National Debt Explained: Is Prolific Borrowing A Wise Economic Strategy?

Canada’s national debt is counted as the debts of the government of the Kingdom of Canada’s central federal government, based in Ottawa.

The national debt figure includes all public debt, encompassing the accounts of Canada’s provinces and territories as well as the central government.

The account of debts is limited to loans and financial instruments undertaken by the central and provincial governments. According to the IMF, by the end of 2017, Canada’s national debt was just shy of 90% of GDP.

Canada’s National Debt & Interest Over Time

The table below shows how Canada’s debt has evolved and the amount of interest paid each year.

This constant rise in the Canadian national debt is a worrying trend.

Ordinarily, governments should aim to reign in debt during boom years when tax receipts are high, but Canada has continued to borrow through the good times, leaving it little room for maneuver if the economy turns sour.

What Is Included In Canada’s National Debt?

Not all obligations are included in the national debt. The table below clarifies what is and isn’t included.

Other Facts About Canada’s National Debt

What facts should you know about Canada’s national debt?

• You could wrap $1 bills around the Earth 3,999 times with the debt amount.


• If you lay $1 bills on top of each other they would make a pile 112,183 km, or 69,707 miles high.


• That's equivalent to 0.29 trips to the Moon.

How Much Is Canada’s Provincial Debt?

The provinces of Canada have a great deal of autonomy. They are responsible for running Health, Education, and Social Security systems, all of which cost a great deal of money and incur debts.

The figures below refer to “net debt.” The IMF calculations on Canada’s debt to GDP ratio work on “gross debt.”

The rate of increase in provincial debt has not been uniform. For example, Alberta’s debt has increased by almost 125% whereas Saskatchewan’s debt has increased by ust under 3%.

How Is Provincial Debt Raised In Canada?

Each province of Canada raises its own debt through debt instruments.

For example, the Province of Ontario owes C$348.8 billion outstanding and some of that debt is denominated in foreign currencies.

These are:

• U.S. dollars
• Euros
• Swiss francs
• Australian dollars
• Pound Sterling
• Japanese yen

What Currencies Is Ontario’s Debt Issued In?

The currencies in which Ontario’s debt instruments are issued are shown below in order of magnitude, with the equivalent sum in Canadian dollars alongside.

1. Canadian Dollars — C$278.3 billion
2. U.S. Dollars — C$40.4 billion
3. Euros — C$13.6 billion
4. Swiss Francs — C$2.2 billion
5. Australian Dollars — C$1.5 billion
6. Pound Sterling — C$0.9 billion
7. Japanese Yen — C$0.5 billion

These figures are for just one province of Canada. This shows that a single province in the country manages a debt that is as large as that of many small industrialized countries.

The composition of Canada’s national debt is complicated and involves many different agencies that are authorized to issue bonds. In the case of Ontario, the debt of the province is managed by the Ontario Financing Authority.

Does Canada Have Any Non-Public Debt?

Although it is not counted as part of the national debt, the federal government and each province maintains a count of non-public debt.

The main source of this debt is the national pension scheme, which is called the Canada Pension Plan Investment Board (CPPIB).

Government obligations to future pension payments are not recorded.

Who Manages Canada’s National Debt?

The federal debt is the responsibility of the central government’s Department of Finance.

This ministry issues three types of debt-raising instruments:

• Treasury bills for short-term finance
• Government bonds for long-term finance
• Savings bonds for the retail market

Of these three sources, both Treasury bills and bonds raise equal amounts of money. This is unusual because most governments tend to raise much more in bonds than in Treasury bills.

What Is Short-Term Financing Used For?

Short-term financing is generally more expensive than long-term debt and usually only used to smooth out the irregular remittances of tax and excise incomes.

This source of debt is more likely to be high in countries such as Argentina or Turkey where investors have lost confidence in the government to repay debts over the longer term.

However, Canada has an excellent credit rating, so it shouldn’t need to resort to short-term instruments in such large measure.

How Do Treasury Bills Contribute To Canada’s Debt?

A Treasury bill doesn’t pay any interest, but it is sold at a discount and redeemed at full face value. As this is a short-term financing device, Treasury bills do not have a maturity period of longer than one year minus one day.

The one year period is the minimum maturity for a debt instrument to be defined as “long-term.”

Savings bonds are a useful mechanism for the government to diversify into the retail market. However, these bonds only provide a very small source of funds for the Canadian government.

Types Of Canadian Government Bonds

The government of Canada offers three types of bonds:

1. Benchmark bonds
2. Real Return Bonds
3. Canadian Savings Bonds

The Canadian Savings Bond is officially considered a debenture rather than a bond. These were issued by the Bank of Canada, but were discontinued in 2017.

The benchmark bond is the classic government bond with maturity terms of between 2 years and 50 years.

These bonds pay a fixed rate of interest each year and are redeemed at full face value on maturity.

Does Canada Have An Inflation Bond?

The Real Return Bond is Canada’s inflation-linked bond. The face value of these bonds increases each year in line with inflation. The bond pays the same interest rate every year throughout its life.

However, as that percentage is applied to a larger capital amount each year, the interest paid on these bonds increases with inflation as well.

As with the provinces, some government bonds are issued in foreign currencies. The table below shows the planned and actual debt raising actions of the Department of Finance for 2017.

All figures are shown in billions of Canadian Dollars.

How Accurate Were These Projections?

Canada’s Department of Finance got its projections pretty close to what the government actually needed to borrow in the end.

This is another good sign that Canadian debt is worth investing in.

This is because a government that has statisticians that can actually predict borrowing requirements is less likely to be caught out by events and more likely to manage its debt responsibly.

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Further Reading

To find out more about national debt in the Americas, see our live debt clocks on:

• Brazil’s National Debt
• Colombia’s National Debt
• Mexico’s National Debt
• US National Debt

You can also learn about the economies of dozes of countries by seeing our economic overview guides on GDP, imports, and exports.