Varun Kohli May 4, 2023 No Comments

With all the media talk on inflation, a potential recession, the need for the BOC to cut rates again, and the PSAC strike, Tembo thought it would be stimulating to provide an objective overview of the state of the federal government’s present finances. We do not take a partisan view, and are merely outlining the facts. We need to keep in mind that the federal fiscal situation has been heavily shaped by the eyewatering costs of responding to the COVID-19 pandemic. How these federal finances pan out in the coming years, however, will have a big impact on inflation, and on how quickly the BOC can get us back to 2-3% interest rates and the housing boom times we’re all used to!

The deficit

For 2023 it will reach $40 billion, up from the roughly $30 billion that was forecasted in an earlier fiscal update.

For the purposes of objective comparison, the Trudeau government inherited a $1 billion deficit from the Harper government in 2015, as per their own budget documents from the 2015-16 fiscal year.

A path to balance?

The 2023 budget does not explicitly mention a strategy of when the budget will go back to surplus. It was heavily criticized for this. The government is projecting the deficit to fall to $14 billion by 2027, but says little else on when federal finances will stabilize.

Total annual spending

Has hit $490.5 billion. That’s almost half a trillion dollars that the Federal government spends every year.

Annual federal spending was $298.3 billion in 2015-16, just over 8 years ago. That represents an increase in spending every year of over $192 billion dollars, or 64%.

The government also acknowledged that it overspent its own 2022 budget by $18 billion.


By the end of 2023, total net federal government debt will be $1.2 trillion. This is an increase of over $600 billion from the total $687 billion in debt the Harper government left behind. Much of this significant increase is a result of the COVID-19 pandemic.

In response to the global financial crisis, the Harper government increased the national debt by over $150 billion from 2008 to 2015 to fund stimulus budgets and accommodative fiscal policy.

Debt as a percentage of economic output (debt to GDP ratio)

The debt to GDP ratio outlines that size of total federal government debt in relation to total annual economic output. The ratio for 2023 will be close to 50%, up from 32% in 2015-16.

Although Canadian federal debt is very competitive and much lower than the debt of other advanced economies, we must keep in mind that these numbers only represent the liabilities of our federal government.

These figures say nothing about provincial and municipal finances. If you combine the total of our federal, provincial, and municipal public debt, Canada would rank as one of the most heavily indebted countries in the world.

Money spent on interest to service the national debt every year

This figure will hit $44 billion this year, and is expected to rise to $50 billion by 2027, up from the $25 billion spent on interest when the Trudeau government came to power 8 years ago. This is more than the government spends on defence, and over twice as much as Ottawa spends on equalization payments to poorer provinces.

In total, provincial and federal spending on interest payments will near $70 billion this year, up from $50 billion pre-COVID.


Spending has soared, but so to have the revenues that the federal treasury receives. Revenues totaled $295.5 billion in 2015-16, and have since risen to $456.8 billion.

This represents an increase in spending of over $161 billion, or 54%, in 8 years.


The government announced a slew of tax increases, set to come into effect on April 1st. These include:

  • Increasing the carbon tax to 14 cents per litre of gasoline and 12 cents per cubic metre of natural gas;
  • Federal alcohol taxes will also increase by two per cent;
  • A tax on share buybacks;
  • Taxation on dividends received by financial institutions;
  • And higher taxes on top earners and intergenerational business transfers.

A comparison with the U.S.

Compared to our southern neighbour, the Canadian federal government’s finances are peachy. For just the first half of 2023, the U.S. federal budget deficit will hit $1.1 trillion, or $1.49 trillion dollars Canadian. That’s almost 80 times what our federal government is projecting. That marks a $430 billion increase in U.S. annual borrowing from 2022 figures. The sky-high U.S. deficit is one of the main underlying causes of the elevated inflation in the U.S. and will grow even larger if the U.S. faces a recession and a subsequent fall in tax revenues.

A comparison of the world’s most indebted countries

The most heavily indebted countries in the world, when you factor in their debt-to-GDP ratios, are below. Keep in mind that Canada’s debt-to-GDP ratio is 110%, and the U.S.’s is 133%.:

  1. Japan – 257%
  2. Sudan – 210%
  3. Greece – 207%
  4. Eritrea – 175%
  5. Cape Verde – 161%
  6. Italy – 159%
  7. Suriname – 141%
  8. Barbados – 138%
  9. Singapore – 138%
  10. Maldives – 137%

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