Rising Federal Debt Interest Costs Expected to Top $1,400 Per Canadian This Year

New federal budget projections are drawing attention to the growing cost of servicing Canada’s national debt, with estimates suggesting interest payments alone will amount to roughly $1,400 per Canadian in the current fiscal year.

The figures are based on a recent analysis by the Parliamentary Budget Officer (PBO), which found that federal debt charges continue to rise and are expected to consume an increasing share of government revenues in the years ahead. According to the report, debt-servicing costs are projected to reach nearly $59 billion this year.

The Canadian Taxpayers Federation (CTF) says the growing interest burden means billions of dollars are being directed toward debt payments rather than public services, infrastructure projects, or tax relief. The organization argues that escalating borrowing costs are reducing the government’s fiscal flexibility at a time when Canadians are already facing affordability challenges.

The PBO’s assessment noted that while debt charges remain broadly in line with previous fiscal projections, they are on what it described as a “concerning upward track.” Current forecasts indicate public debt charges could rise from 10.6 per cent of federal revenues to 13.2 per cent by 2030-31 if existing trends continue.

On a per-capita basis, federal debt charges are expected to increase from approximately $1,409 annually this year to nearly $1,900 by the end of the decade. The report also projects Canada’s federal debt burden per person will continue to climb over the same period.

Fiscal watchdogs and taxpayer advocates are urging Ottawa to exercise greater spending restraint to slow the growth of debt-servicing costs. They argue that as interest expenses consume a larger portion of government revenues, future governments may face more difficult decisions regarding taxation, spending priorities, and deficit management.

The debate comes amid broader discussions about Canada’s long-term fiscal outlook and the sustainability of federal spending commitments. While supporters of government investment programs argue borrowing can support economic growth and public services, critics contend that rising interest costs demonstrate the risks of sustained deficit spending during periods of higher interest rates.

With debt charges projected to continue increasing over the next several years, the issue is likely to remain a key point of discussion as policymakers weigh future spending plans against the growing cost of carrying the federal debt.

Carney Government Urged To Tackle Federal Deficit And Repair Public Finances

Following a series of floor crossings and three recent byelection wins, the Carney government now holds a majority of seats in the House of Commons. This gives the prime minister and cabinet greater freedom to pass legislation and advance their agenda without needing support from opposition parties. Prime Minister Carney has said it is “time to get serious” about governing the country—raising expectations that the government will adopt a more disciplined approach to federal finances.

However, critics argue that despite pledges to take a “very different approach” from the previous Trudeau government, early fiscal decisions suggest a continuation of similar patterns.

During Justin Trudeau’s time in office, Canada saw seven of the highest per-person spending levels (adjusted for inflation) in recorded history between 2018/19 and 2024/25, spanning pre-pandemic, pandemic, and post-pandemic periods. That period was also marked by nine consecutive deficits and a significant rise in federal debt, which reached historic highs even after accounting for population growth and inflation.

By comparison, earlier federal governments such as those led by Stephen Harper and Jean Chrétien were generally characterized by tighter spending controls, periods of balanced budgets, and more restrained debt growth or reductions. Critics also point to weaker economic outcomes under the Trudeau government, including stagnant per-person GDP growth and declining per-worker business investment—both seen as key drivers of long-term living standards.

Against that backdrop, Carney’s promise of a different fiscal direction raised expectations for change. Yet analysis of the government’s first budget suggests continued reliance on increased spending and borrowing.

From 2025/26 to 2029/30, the Carney government is projected to spend $67.6 billion more than what was previously forecast under the Trudeau plan for the same period. Lower-than-expected revenues also contribute to projected annual deficits ranging from $56.6 billion to $78.3 billion. Over five years, total deficits are projected to reach $321.7 billion—more than double the $154.4 billion previously forecast. Federal debt is also projected to climb to $2.9 trillion by the end of the decade, compared to $2.6 trillion under earlier projections.

Critics warn that continuing on a similar fiscal path could lead to similarly weak economic outcomes for Canadians. They argue that, with a parliamentary majority now in place, the government has both the opportunity and responsibility to change course and implement a more sustainable fiscal strategy.

The upcoming federal fiscal update on April 28 is expected to provide a clearer indication of whether the Carney government intends to pursue meaningful fiscal restraint or maintain its current trajectory.