Government debt is draining thousands of dollars from British Columbians each year—in interest alone, warns a Vancouver-based think tank.
B.C. will spend nearly $4.4 billion in interest on provincial government debt in the 2024–25 fiscal year, or 5.3 per cent of its revenue, according to the Fraser Institute’s Federal and Provincial Debt Interest Costs for Canadians, 2025 edition, published last week.
On top of nearly $7.4 billion in federal interest costs, the combined total reaches $11.8 billion, the third highest in the country.
“Interest payments are now a considerable budget expense for the federal and many provincial governments,” stated the report.
“These interest payments consume resources that would otherwise be used for public priorities that would help families or improve Canada’s economic competitiveness.”
The Fraser Institute warned that the interest imposes burdens on taxpayers, who ultimately bear the costs. The interest will cost $2,064 per B.C. resident during this fiscal year, according to the report.
Newfoundland and Labrador has the highest per-person burden at $3,432, followed by Manitoba at $2,868.
The report noted that B.C.’s provincial interest costs exceed the province’s planned 2024–25 spending on child welfare ($4.3 billion), and that the combined federal and provincial costs surpass what the province expects to spend on social services this year ($10.8 billion).
“As a result, less revenue may be available in the future for tax relief or to support health care, education, and social services,” the report stated.
The Fraser Institute also warned that interest costs are tied to the Bank of Canada’s policy rate so should interest rates rise more in the future, the cost of borrowing would increase over time.
"Under those circumstances, even more resources would need to be directed towards interest payments for governments with high debt levels,” the report stated.
The institute added that growing interest costs as a percentage of the economy could create a vicious cycle, as governments would need more revenue to finance debt, leaving fewer resources for the private sector.
“This could also raise the spectre of tax increases to finance the increased debt burden, which could undermine investor confidence,” the report stated.
