Ottawa could be approaching a dangerous financial threshold as mounting federal debt and rising interest payments consume an increasing share of government revenues, Parliamentary Budget Officer Annette Ryan has warned senators.Testifying before the Senate national finance committee, Ryan questioned whether the federal government can continue running deficits while cutting taxes and increasing spending without jeopardizing Canada's financial stability.Blacklock's Reporter said she warned that debt servicing costs are climbing rapidly and could eventually reach levels considered a serious threat to federal finances.“We are working quite hard in the Budget Office on essentially collecting these issues into a single document for your consideration,” Ryan testified.She did not indicate when the report would be released.Ryan's warning came during questioning by Sen. Andrew Cardozo (Ont.), who asked how long Ottawa could afford to reduce taxes while continuing to spend more than it collects.“A tax cut costs a certain amount,” Cardozo said.“What’s the cutoff?” he asked. “When do we have to stop doing that, at which point there’s nothing left in the kitty?”Ryan said the combination of tax reductions, higher spending and pressure from bond yields and interest rates raises serious questions about the government's remaining financial flexibility.“To what extent can we continue to lower taxes and increase spending in a context where there is pressure on bond yields and interest rates, that aspect of what is the room to danger I think is a very live question right now,” she said.“At the limit I think it is at that point where debt charges start to accelerate.”Ryan pointed to the growing share of federal revenues required simply to pay interest on the national debt.“In terms of what that point is, we’re right now moving very quickly from 10 cents of every revenue dollar going to debt service charges to, within a couple of years, that rising to 14 cents on the dollar,” she testified.“There are rules of thumb that when you get up to 18 or 20 cents on the dollar, that’s a danger zone.”.Department of Finance projections released April 28 estimated federal debt servicing costs would reach a record $58.7 billion this year, climbing to $65.7 billion in 2027.Interest payments on bonded federal debt this year have already exceeded federal health transfers to the provinces, according to the original report.Ryan told senators that controlling expenditures and ensuring revenues exceed spending over time remain essential to managing the country's debt burden.“You get a declining debt-to-GDP when you essentially have revenues surpassing expenditures through time,” she said.Balancing the federal budget, Ryan added, “really is at the core of prudence.”She also challenged the government's argument that additional spending would generate enough economic growth to justify continued deficits.“To be fair to the government’s position, they assert the investments they are making across a broad range of measures will increase GDP,” Ryan said.“That is a very ambitious assertion prone to many, many risks. Essentially that is the opposite of prudence. I’ll stop there.”The federal government has not recorded a balanced budget since 2007.Ryan's comments follow similar warnings from her predecessor, Jason Jacques, who appeared before the Commons government operations committee on September 25, 2025..Jacques cautioned MPs that the federal government's fiscal trajectory raised serious questions about long-term sustainability.“It should be very alarming,” he testified.“We don’t lightly use the word ‘unsustainable,’” Jacques said. “Unsustainable means you don’t have the option of saying, ‘Maybe I’ll wait a couple of years, I’ll see how things go.’ It means if you don’t change, this is done.”Jacques compared Ottawa's financial situation to a household repeatedly spending more than it earns.“It’s very serious,” he said.“I think as anyone who has managed a household budget knows, if you sit down at the end of the month and you don’t have enough money to pay your bills and it happens month after month after month, you know something is going to break.”
