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By Ben Eisen
and Charles Lammam
The Fraser Institute

Ontario’s provincial finances are in bad shape. The government’s recent budget confirmed that the province will run its ninth consecutive multi-billion dollar budget deficit in 2016/17, with debt set to surpass $300 billion. Relative to the size of its economy, Ontario is now the second most indebted government in Canada.

It wasn’t always this way. In 2003/04, Ontario was the seventh most indebted province.

Since then, however, Ontario has increased its debt burden much faster than any other province. As a result, it has quickly become one of Canada’s most indebted governments.

Ben Eisen


This matters because Ontario’s uniquely rapid accumulation of debt is a serious economic problem. A robust body of research shows that high levels of government indebtedness can hinder economic growth over the long-term. There are short-term consequences as well; debt requires interest payments and consumes government resources that could otherwise be spent on important public priorities such as healthcare, education, or even tax relief.

Just how quickly has Ontario racked up debt? Provincial net debt (a measure that adjusts for financial assets) has increased by approximately $160 billion since 2003/04. In fact, more than half of the province’s net debt has been acquired in the last 12 years.

By comparison, the other provinces have seen their net debt collectively increase by $126 billion. Notably, Ontario is responsible for 56 percent of new provincial net debt over the period, despite accounting for about 40 percent of Canada’s population and economic output.

Look at the data another way: on a per person basis, from 2003/04 to 2015/16, Ontario’s net debt has increased by $10,292 – again, significantly more than any other province.

Some defend Ontario’s rapid debt accumulation on the grounds that the borrowed money has been used for long-term capital investments that help foster economic growth. But a recent study by University of Calgary economics professor Jean-François Wen found that about two-thirds of the increase in provincial government debt since the recession is due to annual operating deficits (that is, current spending on government operations exceeding revenues) – not long-term capital investments. In other words, Ontarians have been borrowing significant money to finance programs and transfers today while passing the bill onto future generations.

Charles Lammam


Quebec has long been characterized, quite rightly, as Canada’s bastion of fiscal mismanagement largely because of its incredible amount of indebtedness. It therefore is illustrative of just how badly Ontario’s finances have deteriorated that Quebec’s per capita government debt exceeds Ontario by only $1,100. Just six years ago, the gap was four times as large at $4,400 per person. Indeed, by 2017/18, Ontario’s government debt per person will exceed that of Quebec.

Examining the debt burden relative to the size of the provincial economy provides further evidence that the two provinces are converging. Quebec’s net debt as a share of GDP is projected to fall from its current level of 49.3 to 43 percent in 2019/20. Ontario expects its debt-to-GDP ratio to hover just under 40 percent for the near term. If these trends continue, Ontario’s net debt to GDP ratio may also soon exceed Quebec’s.

While several provinces have accumulated considerable debt in recent years, none of them have racked up debt at the pace of Ontario. Canada’s most populous province is now also among its most indebted and, troublingly for Ontarians, this pattern of increasing government debt doesn’t appear set to halt anytime soon.

Ben Eisen is associate director of provincial prosperity studies and Charles Lammam is director of fiscal studies with the Fraser Institute.

Ben and Charles are Troy Media contributors. Why aren’t you?

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