Strengthening Canada’s Fiscal Resilience: The Challenge of Provincial Debt

Kyle Hanniman
Assistant Professor,  Department of Political Studies, Queen's University

One of the greatest sources of Canada’s resiliency in recent years has been the public sector’s ability to borrow. It allowed us to run countercyclical deficits during the global financial crisis and to build bridges for struggling businesses and households during the current pandemic. But this capacity varies considerably across orders of government. The federal government is in a far better position than the provinces to stabilize its debt-to-GDP ratio. It is also less vulnerable to credit shocks. This asymmetry is not unique to Canada. Still, it poses special risks for us because of our unparalleled stock of subnational debt. Canada needs to slowly stabilize provincial borrowing, while ensuring other policy goals, including the provision of adequate services, investment and fiscal stabilization, are met. This talk will discuss the sources of provincial debt and possibilities for stabilizing it going forward.    

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