Public Finance


The distribution of responsibilities between provincial governments and their municipalities can have an impact on the net debt of provinces. In particular, if one considers only the debt of provincial governments without factoring for the debt of municipalities, the debt level of a province whose municipalities assume a greater number of responsibilities risks being underestimated in comparisons with the other provinces. To avoid such bias, the data relating to net debt for each province include the debt of both provincial and local administrations.

In order track changes in the debt of provincial and local administrations of each province along with the effort they must dedicate to interest payments, the following two indicators have been used for analytical purposes:

  • debt servicing as a percentage of gross domestic product (GDP);
  • net debt as a percentage of GDP.

Debt service of provincial and local administration as % of GDP

Source: Statistics Canada, E-STAT, Tables 385-0001 and 384-0002 (updated August 2, 2011).

The data relating to changes in debt service as a percentage of GDP show a generally downward trend for the provinces presenting the highest percentages relative the average for Canada. Thus, in 2009, all these provinces dedicated lesser sums to debt service relative to their GDP than they did in 1989. That being said, some provinces have experienced considerably higher increases on this point. For example, in Newfoundland and Labrador, debt service as a percentage of GDP declined from 6.09% in 1989 to 2.21% in 2009. For the same period, in New Brunswick, debt service as a proportion of GDP held relatively even, varying between 6.08% and 6.14%. In Canada, debt service as a percentage of GDP jumped from 2.52% in 1989 to 1.75% in 2009.

Interestingly, the preceding chart also shows a downward trend in debt service beginning in 1995-96. At that time, the government of several provinces began paying down their deficits in order to achieve balanced public budgets, to reduce their debt and to diminish their debt service payments. On the other hand, in 2001, some provinces, like Nova Scotia, New Brunswick and Manitoba, dedicated a greater share of their financial resources to debt service as a proportion of their GDP than in 1995-96. In the case of both of these provinces, however, the general trend in debt service continued to head downward after years 2001 and 2002 due to a favourable economic situation.

Net debt of provincial and local administration as % of GDP

Source: Statistics Canada, E-STAT, Tables 385-0014 (updated July 16, 2009) and 384-0002 (updated on July 8, 2009).

In contrast with the data pertaining to debt service, no general trend can be discerned in the data concerning net debt as a percentage of GDP of the six provinces having the highest debt levels. In particular, in 2007, three of these six provinces – Manitoba, New Brunswick, and Newfoundland and Labrador – had lower net debt as a percentage of their GDP than in 1987. The strongest variation occurred in Newfoundland and Labrador, where net debt fell 43.8% during this period, whereas Manitoba posted the least such decrease, at 22.4%. This situation is relatively comparable to that noted for all of Canada, where net debt as a percentage of GDP declined 15.4%. As concerns the remaining three provinces – namely, Quebec, Prince Edward Island and Nova Scotia – their total net debt as a percentage of their GDP increased to varying extents between 1987 and 2007. The province reporting the highest increase was Nova Scotia (+ 33.9%), followed by Prince Edward Island (+ 13.1%) and Quebec (+ 2.8%).

Furthermore, for the period stretching from 1995 to 2007, the net debt of six provinces fell considerably where each is concerned. Again, this trend stems from the high priority accorded by provincial governments to eliminating budget deficits beginning in the mid-1990s. Coupled with strong economic growth, anti-deficit measures enabled the provincial governments to considerably slow the growth of their debt, thus producing a direct impact on net debt estimated as a percentage of GDP. It is worth noting that Alberta is the only province in Canada to have entirely eliminated its net debt. Thus, between 1999 and 2007, Alberta, whose net debt once represented 0.3% of its GDP, now enjoys a surplus equivalent to 14.4% of the province’s GDP.