Canadian public debt

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The Canadian government debt, commonly called the "public debt" or the "national debt", is the amount of money owed by the Government of Canada to holders of Canadian Treasury security. In 2013, this number stood at CAD$1.2 trillion across federal and provincial governments.[1] With the total GDP somewhere around CAD$1.8 trillion, Canada's overall debt/GDP ratio is around 66%. "Gross debt" is the national debt plus intragovernmental debt obligations or debt held by trust funds. Types of securities sold by the government include treasury bills, notes, bonds, TIPS[clarification needed], Canada Savings Bonds, and provincial government securities.

The annual government "deficit" is the difference between government receipts and spending....

Revenue and spending[edit]


Canada's federal debt grew steadily between 5% and 10% per year until 1975. For the next 12 years it grew on average over 20% per year. It surpassed $100 billion in 1981, $200 billion in 1985, $300 billion in 1988, $400 billion in 1992, and $500 billion in 1994. It peaked at $563 billion in 1997, before then declining to $458 billion by 2008.

With a recession, and an increase in federal spending from 2008, the federal debt grew by $5.8 billion in 2008–09. Large annual deficits from 2008 to 2013 has Canadian debt surpassing the $600 billion mark by November 2012, making it larger than the 1997 peak in absolute dollars (although far smaller in comparison to GDP). Starting in 2014, Canada returned to balanced budgets and has posted a small surplus.

Net Debt

(Adjusted for
inflation, 2013[3])

as % of
1962 14.8 (113.8) 33.0% 44.9
1971 20.3 (116.6) 20.6% 98.4
1981 91.9 (219.1) 25.5% 360.5
1991 377.7 (557.7) 55.1% 685.4
1997 562.9 (765.1) 63.8% 882.7
2002 511.9 (620.3) 44.4% 1,152.9
2008 457.6 (493.3) 31.4% 1,453.6
2009 463.7 (495.1) 32.8% 1,413.3
2010 519.1 (543.4) 35.5% 1,458.8
2011 551.4 (561.0) 36.9% 1,495.7
2012 583.6 (588.8) 38.3% 1,576.8
2013 609.4 [5] 37.4% 1,608.5
2014 611.9 [6] 32.5% 1,649.2
2015 612.3 [6] 31.0%

Foreign ownership[edit]

In 1960, 4% of the Canadian government debt was held by foreign investors.[7]

From 2009-2010 to 2013-2014, the amount of the Canadian's debt held by foreign investors passed from 15% to 27% with a peak at 30% in 2012-2013. Even if growing, this level is still lower than most G7 countries in 2013-2014 (France, 64%, Germany, 62%, United States, 48%, Italy, 33%, United Kingdom, 29% and Japan, 8%).[8][9]

Public debt held by Canadian provinces[edit]

In fiscal year 2014-2015, the debt-to-GDP ratio of the provinces ranged from -3.5% for Alberta to 50.1% for Quebec.[10]

Calculating and projecting the debt[edit]

In 2002–2003, Canada changed its calculation for net debt. Before this, net debt was defined as the total liabilities minus total assets; now it is the total liabilities minus financial assets, as the government prefers the concept of "accumulated deficit", which corresponds to the old definition of net debt.

Risks of high debt-to-GDP ratio[edit]

Harvard University economists Carmen Reinhart and Kenneth Rogoff warned about the dramatic risks entailed when public debt-to-GDP ratio exceeds 90 percent in their book entitled This Time is Different: Eight Centuries of Financial Folly (2009). The book was published just after the Financial crisis of 2007–2008.[11] In This Time is Different they studied the striking similarities of the recurring booms and busts that have characterized financial history.[12][13] The first condition, suggested by a paper written by Rogoff and Reinhart, has been criticized for major calculation errors. In fact, the average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different from when debt/GDP ratios are lower.[14]

Thomas Herndon, Michael Ash, and Robert Pollin reviewed an influential, widely cited research paper entitled, "Growth in a time of debt",[15] by Reinhart and Rogoff[note 1] Herndon and Pollin argued that "coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period."[16][17][18] Their research had significant basic computation errors that, when corrected, undermined the central claim of the book that too much debt causes recession.[19][20]

Rogoff and Reinhardt claimed that their fundamental conclusions were accurate, despite the errors.[21][22]

According to Hendron, "In their research Rogoff and Reinhart made a coding error which excluded Australia, Austria, Belgium, Canada, and Denmark from their analysis. Without data from these countries there is a "0:3 percentage-point error in R and R's published average real GDP growth in the highest public debt/GDP category. It also overstates growth in the lowest public debt/GDP category (0 to 30 percent) by +0:1 percentage point and understates growth in the second public debt/GDP category (30 to 60 percent) by −0.2 percentage point."[16]

"More significant are Rogoff and Reinhart's data exclusions with three other countries: Australia (1946-1950), New Zealand (1946-1949), and Canada (1946-1950). The exclusions for New Zealand are of particular significance. This is because all four of the excluded years were in the highest, 90 percent and above, public debt/GDP category. Real GDP growth rates in those years were 7.7, 11.9, 9.9, and 10.8 percent. After the exclusion of these years, New Zealand contributes only one year to the highest public debt/GDP category, 1951, with a real GDP growth rate of 7.6 percent."[16]

"For example, Canada spent 5 years in the highest public debt/GDP category (4.5 percent of the 110 country-years in this category) and Canada's average real GDP growth during these 5 years was 3.0 percent per year. However the Rogoff and Reinhart spreadsheet error and the RR years exclusion result in Canada not providing any data for the computation of the average for the highest debt/GDP category."[16] p. 9.

According to the Bank for International Settlements, the combined private and public debt of 18 OECD countries nearly quadrupled between 1980 and 2010, and will likely continue to grow, reaching between 250% (for Italy) and about 600% (for Japan) by 2040.[23] A BIS study released in June 2012 warns that budgets of most advanced economies, excluding interest payments, "would need 20 consecutive years of surpluses exceeding 2 per cent of gross domestic product – starting now – just to bring the debt-to-GDP ratio back to its pre-crisis level".[24] The same authors found in a previous study that increased financial burden imposed by ageing populations and lower growth makes it unlikely that indebted economies can grow out of their debt problem if only one of the following three conditions is met:[25]

  • government debt is more than 80 to 100 percent of GDP;
  • non-financial corporate debt is more than 90 percent;
  • private household debt is more than 85 percent of GDP.

The Boston Consulting Group (BCG) adds that if the overall debt load continues to grow faster than the economy, then large-scale debt restructuring becomes inevitable. To prevent a vicious upward debt spiral from gaining momentum the authors urge policy makers to "act quickly and decisively" and aim for an overall debt level well below 180 percent for the private and government sector. This number is based on the assumption that governments, nonfinancial corporations, and private households can each sustain a debt load of 60 percent of GDP, at an interest rate of 5 percent and a nominal economic growth rate of 3 percent per year. Lower interest rates and/or higher growth would help reduce the debt burden further.[26]

Proponents of Modern Monetary Theory (MMT) do not believe that debt-to-GDP ratios pose risks to countries with floating, non-convertible currencies such as Canada. Australian economist Bill Mitchell explains:

In MMT, we see public debt as private wealth and the interest payments as private income. The outstanding public debt is really just an expression of the accumulated budget deficits that have been run in the past. These budget deficits have added financial assets to the private sector, providing the demand for goods and services that have allowed us to maintain income growth. And that income growth has allowed us to save and accumulate financial assets at a far greater rate than we would have been able to without the deficits.

The only issues a progressive person might have with public debt would be the equity considerations of who owns the debt and whether there is an equitable provision of private wealth coming from the deficits. There is a debate to be had about that, but there is no reason to obsess over the level of outstanding public debt. The government can always honor its debt; it can never go bankrupt. There’s no question that the debt obligations will be met. There’s no risk. What’s more, this debt provides firms, households, and others in the private sector a vehicle to park their saved wealth in a risk-free form.[27]

See also[edit]




  1. ^ Before coming to Harvard's Kennedy School as Professor of the International Financial System, Reinhart was a Senior Fellow at the Peterson Institute for International Economics and Professor of Economics and Director of the Center for International Economics at the University of Maryland. She is a Research Associate at the National Bureau of Economic Research, a Research Fellow at the Centre for Economic Policy Research.


  1. ^ NP 16 May 2013 "Beyond our means: Government debt tops $1.2-trillion and spending is still rising"
  2. ^ Canada's Debt History Canadian Taxpayers Foundation
  3. ^ Inflation Calculator Bank of Canada
  4. ^ World Bank data
  5. ^
  6. ^ a b
  7. ^ Safaraian, A.E. The Hegemony of International Business, 1945–1970, Volume IV: Foreign Ownership of Canadian Industry. New York: Routledge, 1973. 12.
  8. ^ Department of Finance Canada, Debt Management Report 2011–2012,
  9. ^ Department of Finance Canada, Debt Management Report 2013–2014,
  10. ^ "Canadian Federal and Provincial Fiscal Tables" (PDF). Economic Forecasts & Special Reports. Royal Bank of Canada. 23 December 2015. Retrieved 26 January 2016. 
  11. ^ Aslund, Anders (19 April 2013). "Reinhart-Rogoff austerity case still stands". 
  12. ^ Rampell, Catherine (2 July 2010). "They Did Their Homework (800 Years of It)". The New York Times. p. BU1. Retrieved 3 July 2010. 
  13. ^ Orrell, David (Winter 2011). "This Time Is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth S. Rogoff" (PDF). Foresight: The International Journal of Applied Forecasting. Retrieved 18 April 2013. 
  14. ^ Thomas Herndon; Michael Ash; Robert Pollin (15 April 2013). "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff". PERI Policial Research Institute. Retrieved 21 April 2013. 
  15. ^ Krudy, Edward (18 April 2013). "How a student took on eminent economists on debt issue – and won". Reuters. 
  16. ^ a b c d Herndon, Thomas; Ash, Michael; Pollin, Robert (15 April 2013). "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff" (PDF). Political Economy Research Institute, University of Massachusetts Amherst. Retrieved 18 April 2013. 
  17. ^ Goldstein, Steve (16 April 2013). "The spreadsheet error in Reinhart and Rogoff's famous paper on debt sustainability". MarketWatch. Retrieved 18 April 2013. 
  18. ^ Konczal, Mike (16 April 2013). "Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems". Roosevelt Institute. Retrieved 18 April 2013. 
  19. ^ Alexander, Ruth (19 April 2013). "Reinhart, Rogoff... and Herndon: The student who caught out the profs". BBC News. Retrieved 20 April 2013. 
  20. ^ "How Much Unemployment Was Caused by Reinhart and Rogoff's Arithmetic Mistake?". Center for Economic and Policy Research. 16 April 2013. Retrieved 18 April 2013. 
  21. ^ Harding, Robin (16 April 2013). "Reinhart-Rogoff Initial Response". Financial Times. 
  22. ^ Inman, Phillip (17 April 2013). "Rogoff and Reinhart defend their numbers". The Guardian. Retrieved 18 April 2013. 
  23. ^ Stephen G Cecchetti; M S Mohanty; Fabrizio Zampolli (September 2011). "The real effects of debt (BIS Working Paper No. 352)" (PDF). Bank for International Settlements. Retrieved 15 February 2012. 
  24. ^ Norma Cohen (24 June 2012). "Global economy is stuck in a vicious cycle, warns BIS". The Financial Times. Retrieved 21 July 2012. 
  25. ^ Stephen G Cecchetti; M S Mohanty; Fabrizio Zampolli (March 2010). "The Future of Public Debt: Prospects and Implications" (BIS Working Paper No. 300)" (PDF). Bank for International Settlements. Retrieved 15 February 2012. 
  26. ^ "Back to Mesopotamia?: The Looming Threat of Debt Restructuring" (PDF). Boston Consulting Group. 23 September 2011. 
  27. ^ Debt, Deficits, and Modern Monetary Theory Winston Gee

External links[edit]