The share of provincial debt held by each British Columbian will grow more than $5,000 over the next three years, the Fraser Institute reports.
According to the Canadian think tank, the BC government is on track to add $5,315 in new debt per person over the next three fiscal years, which is more debt than was accumulated during the COVID pandemic ($1,680) and the 2008/09 financial crisis ($3,438) combined. These figures are adjusted for inflation.
“British Columbia’s government is planning a rapid increase in provincial debt over the next three years, which will dwarf what was added in the years during and following the past two recessions,” said Ben Eisen, senior fellow at the Fraser Institute and co-author of British Columbia’s Coming Debt Boom in Historical Context.
The study finds that over the next three years, the BC government plans to add a total of $35.6 billion in new debt (adjusting for both inflation and financial assets). This compares with additional debt of $9.9 billion after the pandemic and $17.8 billion after the financial crisis of 2008/09.
Interest rates to service government debt were historically low and/or falling during the 2008/09 financial crisis and COVID periods of debt accumulation, but they are higher now.
As a result, BC’s debt interest payments are expected to rise 36.7% between fiscal years 2022/23 and 2025/26, after adjusting for the effects of inflation.
“British Columbians need to understand just how much debt the government is forecasted to accumulate over the next three years,” Eisen said.
“Government debt comes with a cost and the money that the province spends on debt interest will be unavailable for other priorities such as pro-growth tax relief or core public services.”
The most recent economic update forecasts that nominal debt charges will increase from $2.7 billion in fiscal year 2022/23 to $4.4 billion at the end of the fiscal plan in 2025/26, a 60.8% increase over three years.
“In inflation-adjusted terms using 2023 dollars, per-person interest costs will rise from $531 to $726, a 36.7% increase over the same period,” Eisen warns.
“British Columbia’s debt interest costs are expected to increase from 3.3% of all provincial revenue in 2022/23 to 5.4% in 2025/26. This is still relatively low historically, but the direction and particularly the rate of change are worrying.”
The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto and Montreal and ties to a global network of think-tanks in 87 countries.
Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the institute’s independence, it does not accept grants from governments or contracts for research.
