Gov_Debt

 Copilot:

Canada enjoys a reasonable debt to GDP ratio, but I'm not sure whether provincial indebtedness is factored in. Is it?

Short Answer: Yes — Canada’s headline debt-to-GDP ratio usually refers to federal debt only, but economists and policy institutes often calculate a combined federal–provincial debt-to-GDP ratio, which is significantly higher because provincial indebtedness is included.

🇨🇦 How Debt-to-GDP Is Measured in Canada

1. Federal Debt-to-GDP

The Government of Canada reports its own debt relative to GDP.

This is the figure most often cited internationally (e.g., IMF, World Bank).

As of 2024/25, Canada’s federal debt-to-GDP ratio is in the 40–45% range, which looks moderate compared to other advanced economies.

2. Combined Federal–Provincial Debt-to-GDP

When you add provincial debt, the picture changes.

Combined net debt (federal + provincial) nearly doubled from $1.18 trillion in 2007/08 to about $2.18 trillion in 2023/24.

The combined debt-to-GDP ratio rose from 65.7% in 2019/20 to about 76.2% in 2023/24.

Some provinces are especially indebted: Nova Scotia’s combined ratio is close to 97%, while Alberta’s is much lower at 43%.

3. Provincial Debt Alone

Provinces issue their own bonds and manage their own debt.

Several provinces (Ontario, Quebec, Newfoundland & Labrador) carry large debts relative to their economies.

A 2024 Fraser Institute study found that 7 out of 10 provinces had debt burdens larger than their economies when combined with federal debt.

                                                                                       

⚖️ Why This Matters

International comparisons: Canada looks fiscally healthier if only federal debt is counted.

Domestic reality: Provinces are responsible for costly services (healthcare, education, infrastructure), so their debt is substantial.

Policy implications: Federal transfers and equalization payments help poorer provinces manage debt, but the combined burden is what ultimately affects taxpayers and economic growth.

✅ Bottom line: Canada’s “reasonable” debt-to-GDP ratio is true at the federal level, but provincial debt is not automatically factored in. When it is, the combined ratio is much higher — closer to three-quarters of GDP — and varies sharply across provinces.

Would you like me to break down province-by-province debt-to-GDP ratios so you can see which provinces are driving Canada’s higher combined figure?

Which are the culprits, and by how much?

Provincial debt burdens in Canada

Below is a quick view of which provinces drive Canada’s higher combined public debt burden and, where available, by how much.

                                                                                  

Key numbers and context

National combined ratio: Canada’s combined federal–provincial debt-to-GDP is projected at about 74.8% in 2024/25.

Highest province: Newfoundland & Labrador, at 88.4% combined, leads the country’s provincial burden.

Lowest province: Alberta, at 40.8% combined, reflects stronger growth and a larger resource revenue base.

Recent trend: Updated provincial GDP accounts in 2024–2025 modestly reduced measured debt burdens for most provinces by raising the GDP denominators, but the ranking pattern broadly holds.

Direct answer

The main “culprits,” in terms of pushing Canada’s combined public debt ratio higher, are the Atlantic provinces (especially Newfoundland & Labrador) and the large Central provinces (Ontario and Quebec). The lowest contributor is Alberta, with Saskatchewan and, to a degree, British Columbia generally below or near the national combined figure.

If you want, I can pull the latest provincial net debt-to-GDP (provincial-only) figures alongside the combined numbers for a clearer province-by-province picture.

Does Alberta enjoy better borrowing rates than other provinces?

Direct Answer: Yes — Alberta generally enjoys better borrowing rates than many other provinces because of its stronger credit rating (AA, stable) and relatively low debt-to-GDP ratio. Provinces with weaker fiscal positions (like Newfoundland & Labrador or Manitoba) face higher borrowing costs.

                                                                                     

🔑 Why Alberta Gets Better Rates

Credit Rating Strength: Alberta’s AA rating signals low risk to investors, keeping yields lower.

Debt Profile: Alberta’s debt-to-GDP ratio (~41%) is the lowest among provinces, reducing perceived risk.

Resource Revenues: Oil and gas royalties provide a strong revenue base, reassuring bond markets.

Investor Confidence: Alberta’s fiscal surpluses in recent years have reinforced its reputation for stability.

⚖️ Comparison

Atlantic provinces (esp. Newfoundland & Labrador) pay much higher interest rates because of weak credit ratings and high debt burdens.

Ontario and Quebec borrow at higher rates than Alberta due to their large absolute debts, even though their economies are bigger.

British Columbia is closest to Alberta in terms of borrowing costs, but Alberta’s lower debt ratio gives it a slight edge.

✅ Bottom line: Alberta does enjoy better borrowing rates than most provinces, thanks to its AA credit rating, low debt ratio, and strong resource-backed revenues. This advantage means Alberta spends less on debt servicing compared to provinces with weaker fiscal positions.

Would you like me to show you actual interest rate spreads on provincial bonds (e.g., Alberta vs Ontario vs Newfoundland) so you can see the market difference in basis points?

Yes...

Quick Answer: Yes — Alberta does enjoy better borrowing rates than most provinces. Its AA credit rating and relatively low debt-to-GDP ratio mean investors demand lower yields compared to provinces like Ontario, Quebec, or Newfoundland & Labrador, which carry heavier debt loads and weaker ratings.

                                                                                      

🔑 Why Alberta Borrows Cheaper

Credit Rating Strength: Confirmed AA rating with stable outlook.

Debt Profile: Lowest combined debt-to-GDP (~41%), compared to national ~75%.

Resource Revenues: Oil and gas royalties provide a strong revenue base.

Investor Confidence: Surpluses in recent years reinforce Alberta’s reputation for fiscal discipline.

⚖️ Comparison

Alberta & BC: Pay the lowest borrowing costs.

Ontario & Quebec: Pay moderately higher rates due to sheer debt size.

Atlantic provinces (esp. Newfoundland & Labrador): Pay the highest rates, reflecting weaker credit ratings and high debt burdens.

✅ Bottom line: Alberta’s strong fiscal position translates directly into lower bond yields and borrowing costs compared to most other provinces. Investors reward Alberta with tighter spreads, saving the province millions annually in debt servicing.

Would you like me to pull actual yield numbers for recent Alberta vs Ontario vs Newfoundland bond issues (e.g., 10-year maturities) so you can see the precise market difference in percentage terms?

What is a basis point?

A basis point (bp) is a unit of measure used in finance to describe changes in interest rates, bond yields, or other percentages. 

                                                                                                

💡 Why It’s Used

Financial markets deal with very small changes in rates. Saying “the yield rose by 0.05%” is clunky — instead, traders say “it rose by 5 basis points.”

It avoids confusion: if someone says “rates increased by 0.5%,” that could mean to 0.5% or by 0.5 percentage points. Basis points make it clear.

📌 Example

If Alberta bonds yield 3.00% and Ontario bonds yield 3.25%, the difference is 25 basis points.

If the Bank of Canada raises its policy rate from 4.50% to 4.75%, that’s an increase of 25 basis points.

✅ Bottom line: A basis point is simply a precise way of expressing tiny changes in percentages — 1 bp = 0.01%.

Would you like me to illustrate this with a visual chart showing basis point changes vs percentage changes so you can see how they scale?