MONREAL, QUEBEC--(Marketwired - Aug. 18, 2014) - Quebec's government spends more than 11 cents of every dollar of revenue on debt interest payments, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
The study, The Cost of Government Debt in Canada, spotlights the growth of government debt in Canada since the 2008/09 recession, and the cost of interest payments on government debt.
"Quebec is more deeply in debt than any other province, and interest payments on the debt leave less money in the budget for other priorities important to Quebecers and their families," said Sean Speer, study co-author and associate director of the Fraser Institute's Centre for Fiscal Studies.
Quebec's debt is the highest in Canada, equalling nearly 50 per cent of the provincial economy (up from 40.8 per cent in 2007/08). Quebec also has the highest debt per person in Canada, with every Quebecer owing $22,300 for the province's $182 billion debt.
Consequently, in 2013/14 the Quebec government spent $10.6 billion on interest payments (or 11 cents of every dollar of revenue). By comparison, Quebec collected $6.3 billion in health premiums from Quebecers in 2013/14.
"Every dollar spent on interest is one less dollar available for health care, education, social assistance or tax cuts. If the government continues down the same path of deficits and growing debt, Quebecers may see more tax dollars flushed away on interest payments," Speer said.
Finally, while debt levels are important, higher interest rates pose a real threat to Quebec's government finances.
"Governments across Canada have been borrowing at historically low interest rates, so if interest rates rise, the cost of carrying debt will increase, and Quebec, with its mountain of debt, is especially vulnerable to interest rate hikes," Speer said.
The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 87 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.