Interest Expense Expected to Climb to $15B by 2027
With the announcement that the Province of Ontario will remain in deficit spending until 2027, and given the higher interest environment, Ontario’s interest expense is expected to increase to $15.2B by 2027, according to official documents from the Government of Ontario:
Almost $100B of Borrowing in the Pipeline Over the Next 2 Years
These documents reveal that, Including maturing bonds, the Province of Ontario is expected to borrow almost $100B over the next 2 years.
Not all of this is new borrowing though, much of it will be refinancing existing debt. Regardless though, they will be refinancing at a higher rate, and this forces interest expenses higher.
Interest Owed to Cost More than all Post Secondary Funding for the Foreseeable Future
The interest on the debt now costs more than the province spends funding all of its universities and colleges, and this is expected to remain the case for, well, forever. (or until they fix it)
Ontario spends $12B on its Post-secondary funding program and this spending is set to increase to $13B by 2027.
If you have glace back at the first chart at the top of the page, you will find that this will be a full $2B lower than the interest it will owe during this period.
Federal Government Interest Expenses Up Too — Q4 2023 Debt Service Rises to $24.9B
In the fourth quarter of 2023, Canadian General Governments’ (this is Federal and Provincial combined) interest expenses increased by 20.0% from one year earlier, according to new data from Stats Canada.
In 2023, Governments in Canada officially paid $93.8 billion in interest, with most of the contribution coming from the Federal government, whose interest expenses increased by 39.3% in a single year. The growth of interest expenses incurred by provincial and territorial governments was smaller at only 7.3% YoY.
2024 Interest Expenses Likely to Break the $100 Billion per Year Mark
Barring any surprise downside interest rate shocks, Governments in Canada are now expected to pay over $100 Billion in interest expense in 2024, as its bonds continue to mature and as new borrowing continues.
This is more more expensive than Canada’s elderly benefits programs. (Old Age Security and Guarenteed Income Supplement)
Borrowing is getting expensive — and sooner or later, governments will have to respond to this new reality by either raising taxes, cutting services or borrowing more, and kicking the can down to the road.
