Budget season is approaching and while government debt has been increasing rapidly for years in Canada, today’s relatively high interest rates have made it more expensive to borrow money than in the recent past.

According to our new study published by the Fraser Institute, between 2007-08 and 2023-24 federal and provincial government net debt (i.e., total debt minus financial assets) has increased by roughly $1.0 trillion in inflation-adjusted dollars. Though pandemic-induced deficits explain part of that, fully 58 per cent of the run-up in debt occurred before COVID. That deserves emphasis: our current debt problems are not mainly the result of the pandemic.

Because both federal and provincial governments borrow—municipal governments not so much—Canadians face different government debt burdens depending on where they live. Newfoundland and Labradorians currently owe the largest combined (federal and provincial) government debt in Canada at $67,471 per person. Ontarians are not far behind at $60,609 while Albertans are in the best shape at $42,293.

In terms of debt-to-GDP ratios, the four Atlantic provinces are all currently above 85 per cent, which means it would take more than four out of every five dollars generated in the economy of each Atlantic province this year to pay off their combined federal and provincial debt.

Nova Scotians are worst off, with combined debt equivalent to 97 per cent of what their economy produces in a year. The national average debt-to-GDP ratio is projected to be 76 per cent this year, up significantly from before the pandemic.

Despite a surge in revenues, few Canadian governments are forecasting surpluses for the current fiscal year. Instead, Ottawa and the majority of provinces have chosen to increase their spending and debt and, in most cases, incur deficits for years to come.

This is a worrying trend, as many governments were already on unsustainable debt trajectories that they are now making worse. Governments need to restrain spending and move towards balanced budgets in the short term, while the economy is in relatively good shape, not put off difficult decisions for someone else to take at some future date.

Debt means always having to pay interest. Because their debts have grown and interest rates are higher than they have been for some time, Ottawa and the provinces will together spend $82 billion on debt interest this year—equivalent to the total amount spent on K-12 education in Canada during 2020-21.

Money that goes to interest can’t pay for tax cuts or spending on health care or education. It drives a wedge between the taxes we pay and the services we actually receive. And it burdens, not just today’s taxpayers, but future generations, too.

Growing government debt is not just another unpleasant COVID symptom. It was a problem well before COVID and it’s getting worse even though COVID is now mainly over. This budget season, our federal and provincial governments need to get their fiscal houses in order and stop their debt binging before it spirals even further out of control.