A quick look at Canada's federal debt-to-GDP ratio - Macleans.ca

A quick look at Canada’s federal debt-to-GDP ratio


Prime Minister Stephen Harper is urging his fellow G20 leaders to work on cutting their debt-to-GDP ratios as a way to bolster economic stability.

He has promised Canada will cut its ratio to 25 per cent by 2021, but his call for others to follow seems to fall on deaf ears amid other international concerns.

However, the federal debt-to-GDP ratio has been part of his government’s domestic budget concerns for years.

The ratio compares the federal debt to the GDP, which is the total market value of all officially recognized final goods and services. The ratio can decline through debt reduction and through economic growth.

The ratio has been a moving target in recent years. Here’s a snapshot of how it has moved in Canada, using figures from various Finance Department documents:

— The ratio peaked at 68.4 per cent in 1995-96 in an era where annual federal deficits were hitting $40 billion.

— As deficits shrank and successive budgets paid down some debt, the ratio began to decline.

— By 2004-05, it was down to 38.7 per cent and hit 28.6 per cent in 2008-09.

— In 2008, the Harper government said its objective was to whittle the ratio down to 20 per cent by 2020.

— The global recession reversed the progress, however. Deficits returned and by 2010-11 the ratio had climbed back to 33.9 per cent.

— By the next year, though, it slipped slightly, to 33.8 per cent.

— Although Harper is calling for a ratio of 25 per cent by 2021, his target may have some wiggle room, since a Finance Department report last year forecast a ratio of 23.8 per cent by 2020-21.

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A quick look at Canada’s federal debt-to-GDP ratio

  1. Canada’s debt to GDP ratio including the debt of all levels of government is currently around 85 per cent. The federal debt to GDP ratio is useless for international comparisons because many other countries (such as France) do not have a federal structure. Responsibilities, such as education and health, which in Canada are provincial responsibilities may be the responsibility of the national government in other countries.