Canada Had Largest Debt Increase Among G7 Countries Over Last Decade: Fraser Institute
Canada’s total government debt has grown substantially since 2014 and has outpaced that of nearly every other advanced country around the world, according to a new study from the Fraser Institute.
The
study,
“The Deterioration of Canada’s Finances Internationally” released May 15, compared Canada’s finances during the last 10 years to that of 40 other advanced countries internationally, including G7 countries. The authors found that Canada experienced one of the largest increases in government size over the last decade and now has one of the highest debt burdens of any advanced economy country.
“Simply put, over the past decade, the size of government in Canada and the overall government debt burden have grown faster than nearly every other advanced economy in the world,” says the report, authored by the Fraser Institute’s policy analyst Grady Munro and Jake Fuss, director of fiscal studies.
“This has translated to a deterioration in the state of Canada’s finances relative to comparable countries, and likely means lower economic growth and reduced living standards for Canadians.”
Total government spending in Canada increased from 38.4 percent of the country’s economy in 2014 to 44.7 percent in 2024. This makes Canada the 17th highest for total government expenditures out of the 40 advanced countries analyzed.
“Canada’s 6.34 percentage point increase in government spending relative to the economy was the second-largest increase out of all 40 advanced economies, and the largest in the G7,” the study says. “Only Estonia experienced a greater increase in the size of government during this period at 6.66 percentage points.”
Munro and Fuss’s study indicated that Canada had the largest increase in both spending and debt among the G7 countries. Germany had the second-highest spending increase among the G7, with a 5 percentage point increase, followed by a 2.9 percentage point increase for the United Kingdom, 2.3 for the United States, and 1 percentage point for Japan. France and Italy both saw decreased spending during the past decade, by 1.2 percentage points and 0.2 percentage points respectively.
Canada’s debt burden jumped by 25.23 percentage points since 2014, the third-highest increase in debt among the 40 economies and the largest increase in debt among G7 countries. Although Canada’s debt burden increased significantly, 20 of the 40 countries decreased their total debt burden, for an average 2.79 percentage point decrease among the 40 countries over the last decade.
France’s debt burden was second highest among the G7 countries, with a 17 percentage point increase, followed by the United States with 16.4 percentage points, the United Kingdom with 14.1, Japan with 3.4, and Italy with 0.5. Germany was the only G7 country to reduce its debt burden, with a 10.6 percentage point decrease.
The authors said the Canadian government relied heavily on borrowing money to fund its expansion and spending increase, which in turn increased federal and provincial government debt.
The Canadian government’s gross debt increased to 110.8 percent of GDP in 2024, from 85.5 percent in 2014, indicating that Canada now has the seventh-highest indebtedness ranking out of the 40 countries analyzed, and the fifth highest among the G7 countries.
“Canada likely suffers lower economic growth than it otherwise would have with a lower debt burden,” the study says. “This problem will only worsen if debt continues to grow relative to the size of the economy.”
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Many countries saw a spike in debt burden during the pandemic in 2020 as governments borrowed money to fund pandemic-related programs while the economy was in recession. However, Canada borrowed the most relative to the size of its economy, Munro and Fuss said. In 2020 alone, Canada’s debt burden increased by 27.86 percentage points.
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Research suggests that growing spending and rising debt in Canada are likely to harm overall economic growth,” the study says.
An increasing government debt burden corresponds to higher interest payments for taxpayers, less money for key services, and higher taxes for the future generations of Canadians, Munro said in a
news release.
“Taxpayers ultimately pay for government debt in the form of interest payments, which divert money away from key services, and future generations of Canadians could face higher taxes to pay for today’s borrowing,” Munro said.
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