In response to the ongoing trade dispute with the US, Ottawa announced $7.5 billion in business and worker relief. It is useful to examine how much fiscal room Canadian governments have to expand debt obligations. Compared to the dire fiscal situation of 1995-1996, Canada has not yet reached this crisis level. By 2014-15, Canada’s combined net debt ratio had fallen to a low of 64% of GDP, with debt charges down to 9% of own-source revenues. Both are now rising – the net debt ratio is already projected to exceed 80%, excluding announced relief measures, with debt charges climbing to 11%. Governments must be careful not to return to 1995 levels.
For more on fiscal sustainability, see this Commentary.
