Canadians Face $94.4-Billion Government Debt-Interest Bill This Year, Study Finds

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A government budget can feel distant until one line item grows large enough to rival the services people use every day. A newly released Fraser Institute study estimates that federal and provincial governments devoted a combined $94.4 billion to debt-interest costs in the 2025/26 fiscal year. The figure is not a new tax bill arriving in household mailboxes, nor is it a final audited total. It is a projection assembled from the latest federal and provincial fiscal plans.

Even with those qualifications, the scale is striking. Interest absorbs revenue without creating a new hospital bed, classroom or transit line. The study argues that years of deficits, a larger stock of debt and the delayed impact of higher borrowing rates have turned debt servicing into one of the country’s most consequential budget pressures.

The $94.4-Billion Total Is a Projection, Not a Household Invoice

The headline figure combines an estimated $54.0 billion in federal public debt charges with about $40.4 billion in provincial interest costs. According to the study’s calculations, that equals roughly 8.2 per cent of the combined revenues collected by Ottawa and the provinces. Put another way, more than eight cents of every government revenue dollar covered by the calculation was assigned to interest rather than program spending, tax relief or deficit reduction.

That distinction matters because the $94.4-billion total is not an amount Canadians will pay through a separate levy. Governments finance interest from their overall revenue pools, which include personal and corporate income taxes, sales taxes, resource revenues and other receipts. The study also relies on budget projections available when it was prepared, so final public accounts may differ. Still, the estimate offers a useful picture of opportunity cost: once interest is due, governments must pay it before deciding how much fiscal room remains for new or expanded priorities.

Ottawa’s Interest Tab Nearly Matches the Health Transfer

The federal portion is the largest single piece of the total. Finance Canada projects $54.0 billion in public debt charges for 2025/26, equal to about 10.6 per cent of federal revenue. That means Ottawa is directing slightly more than 10 cents of each revenue dollar to servicing debt. The comparison becomes more tangible beside the Canada Health Transfer, which is projected at $54.7 billion for the same fiscal year.

Debt charges also exceed two major federal supports for families when they are combined. The Canada Child Benefit is projected to cost $30.2 billion, while Canada-wide early learning and child-care transfers are expected to total $7.9 billion. Together, those programs amount to $38.1 billion—almost $16 billion less than the federal interest bill. These comparisons do not mean health or family benefits would automatically receive the money if debt charges were lower. They do show how a fixed financing cost can narrow the choices available to any government preparing a budget.

The Burden Varies Sharply From Province to Province

The study translates federal and provincial interest costs into a per-person estimate by allocating Ottawa’s interest bill among the provinces according to their average shares of Canada’s population from 2021 to 2025. On that basis, Newfoundland and Labrador carries the highest combined amount at $3,348 per person. Manitoba ranks second at $2,816, followed by Quebec at $2,436. Alberta is lowest at $1,845 per person.

These figures should be read as an illustration of public-finance pressure, not as a literal amount charged equally to every resident. People pay different amounts of tax, and governments collect substantial revenue from businesses and other sources. Even so, the provincial spread is revealing. It reflects differences in debt loads, interest costs, revenue bases and population. The study also excludes municipal interest from its $94.4-billion estimate, meaning the reported amount does not capture every public-sector borrowing cost ultimately supported by Canadians.

Ontario and Quebec Account for Most of the Combined Bill

Canada’s two largest provinces naturally produce the biggest dollar totals. The study estimates that Ontarians’ allocated share of federal interest, combined with Ontario’s own debt-servicing costs, reaches $37.1 billion. Ontario’s provincial interest and other debt-servicing charges alone are projected at about $16.0 billion in 2025/26, compared with $14.0 billion for postsecondary education and $40.5 billion for the kindergarten-to-Grade 12 education sector.

Quebec’s combined federal-provincial amount is estimated at $22.1 billion, including roughly $10.2 billion in provincial interest costs. The study compares that total with Quebec’s projected $23.5-billion spending on kindergarten-to-Grade 12 education. Those comparisons are especially useful because billions can otherwise become abstract. In both provinces, the interest bill is approaching the scale of an entire major public service. Ontario’s fiscal plan also projects debt-servicing charges rising to $19.7 billion by 2028/29, showing why the issue is not limited to a single budget year.

British Columbia and Alberta Show Different Sides of the Same Pressure

British Columbia’s combined federal-provincial interest allocation is estimated at $12.5 billion. The provincial portion is about $5.0 billion, while the allocated federal share is roughly $7.4 billion. The study notes that the combined amount is higher than British Columbia’s projected $10.7 billion in provincial sales-tax revenue. B.C.’s 2026 budget also projects continuing deficits and a rising taxpayer-supported debt burden, even as the province describes its debt-servicing costs as comparatively low.

Alberta records the country’s lowest combined per-person figure, but its interest costs have still climbed. Provincial interest expenses are estimated at $2.9 billion for 2025/26, up from $776 million in 2015/16, according to figures used in the study. Once Alberta’s population-based share of federal interest is included, the combined amount reaches about $9.3 billion. That is more than the province’s planned spending on advanced education. Alberta’s comparatively strong balance sheet therefore reduces the burden; it does not eliminate the broader impact of federal borrowing or the cost of its own renewed debt accumulation.

Lower Policy Rates Do Not Erase the Bill Overnight

Government borrowing costs do not move in perfect lockstep with the Bank of Canada’s overnight rate. Ottawa and the provinces issue securities with different maturities, and much of that debt carries a fixed rate until it is refinanced. When an older bond matures, the government may have to replace debt issued during a low-rate period with new borrowing at a higher rate. The impact therefore arrives gradually rather than all at once.

That lag helps explain why interest expenses continued rising after the Bank began lowering rates. The Bank had raised its policy rate seven times in 2022, for a total increase of four percentage points, and added another 0.75 percentage points through three increases in 2023. Statistics Canada later reported that consolidated government interest expenses exceeded $100 billion in 2024 despite falling policy rates, attributing the rise to refinancing at rates above pandemic-era lows and to a larger stock of liabilities. Lower rates can help at the margin, but they cannot instantly undo years of additional borrowing.

Persistent Deficits Keep the Pressure Building

The size of the debt matters as much as the interest rate attached to it. The Fraser Institute estimates combined federal-provincial net debt at a record $2.4 trillion in 2025/26 and notes that Ottawa and all 10 provinces were projected to record deficits. A government can sometimes borrow productively—for infrastructure, emergency support or investments expected to raise future economic capacity—but repeated deficits still add to the amount that must eventually be financed.

The federal outlook illustrates the arithmetic. Finance Canada projects public debt charges rising from $54.0 billion in 2025/26 to $80.9 billion in 2030/31 as debt and effective interest rates increase. The Parliamentary Budget Officer offers a similar warning: under its June 2026 outlook, federal debt charges per person rise from $1,288 in 2025/26 to $1,885 in 2030/31, while the debt-service ratio climbs from 10.6 per cent to 13.1 per cent of revenue. Forecasts can change, but the direction shows how today’s deficits can constrain budgets years later.

The Broader Cost Is Already Above $100 Billion

The $94.4-billion estimate covers federal and provincial debt interest for 2025/26, but it is not the broadest possible measure. Statistics Canada’s consolidated government accounts include federal, provincial, territorial and local governments. On that basis, general-government interest expenses reached $102.4 billion in calendar 2024. The Fraser Institute’s fiscal-year comparison, using a related but not directly identical dataset, places federal, provincial and local interest costs at $108.5 billion in 2024/25.

Different accounting periods and methodologies mean those totals should not be treated as interchangeable. Their shared message, however, is clear: Canadian public debt interest has moved beyond a niche line in fiscal tables. Statistics Canada found that consolidated interest expenses rose 10.3 per cent in 2024 and absorbed 8.8 per cent of government revenue. For families waiting on health care, schools or infrastructure, the effect is indirect but real. The central policy question is not whether governments should ever borrow; it is whether the benefits financed by borrowing are sufficient to justify a growing, recurring claim on future revenue.

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