Federal Public Debt Charges Expected to Hit $53 Billion by 2024: Parliamentary Budget Office

Parliamentary Budget Officer Yves Giroux waits to appear before appearing at the Senate Committee on National Finance in Ottawa on Oct. 25, 2022. The Canadian Press/Adrian Wyld

Federal debt charges are expected to hit $53 billion by 2024, says the Parliamentary Budget Office in its “Risk Scenario Analysis” report.

Published on Nov. 10, the report says that the debt service ratio, which is public debt charges relative to tax revenues, is projected to reach 14.3 percent in 2024.

“Public debt charges are $5.6 billion higher per year, on average, over 2023-24 to 2027-28,” the budget office wrote, as first reported by Blacklock’s Reporter.

The forecast for public debt charges in 2022-23 amounts to $31.7 billion, according to the report. The projected costs continue to rise to 47.3 billion in 2023-24 before peaking at $53.4 billion in 2024-25.

In a hearing before the Senate banking committee on Sept. 27, parliamentary budget officer Yves Giroux testified that Canada’s inflation of 7 percent at the time would impact on the interest that governments will have to pay on debt.

“That will have a major impact on public finances not only at the federal level but also at the provincial level,” Giroux said.

“We’ve looked at the impact of increasing interest rates as well as the increase in the stock of debt. We estimate that in the next four years interest payments will probably double compared to their level in 2021-22. They will probably go from $23 billion, if memory serves me well, to $46 billion.”

‘More and More Debt’

Last May, the Liberals, through its Bill C-14, amended the Borrowing Authority Act, raising the federal government’s debt ceiling from $1.168 trillion to $1.831 trillion—a nearly 57 percent hike.

In her testimony at the Commons finance committee (FINA) on March 11, 2021, Finance Minister Chrystia Freeland defended her stance on Bill C-14, which she sponsored.

“We are saying that this is the upper limit up to which the government may borrow,” she said.

“We are not saying that the government will undertake those borrowings, nor are we saying anything about government spending.”

Senator Elizabeth Marshall criticized Freeland’s testimony at the Senate’s debate on June 22 this year.

“Now, just 15 months later, we are told that debt is now $1.6 trillion. We are well on our way to reaching that $1.8 trillion ceiling,” Marshall said.

“As the government takes on more and more debt, we have been assured by them that the cost of servicing this debt, or the ‘public debt charges,’ remain low. However, we now know that interest rates are rising quickly and so is the cost of servicing the government’s debt.”

“A review of the government’s financial documents over the past two and a half years shows that debt servicing costs are increasing significantly. Projections included in the last two budgets and the last two fall fiscal updates point to a rising concern over increasing interest costs,” the senate added.

A report by FINA released on April 4 recommended that the cabinet lower spending and “present, as soon as possible, a plan to return to a balanced budget that includes several scenarios to adjust for economic conditions.”

“On the issue of government spending, the Committee heard proposals to cut funding for media and Crown corporations, ensure financial transparency and end business subsidies,” said the report, titled “Report 3 - Considering the Path Forward.”