VANCOUVER, British Columbia, June 29, 2021 (GLOBE NEWSWIRE) – Federal government interest costs could rise to $ 35 billion in 2021-22, an increase of $ 13 billion, if costs return to levels of 2019-20, finds a new study published today by the Fraser Institute, an independent and nonpartisan Canadian think tank on public policy.
“If interest costs rise, Canadian governments could see their already large budget deficits grow further,” said Jake Fuss, senior economist at the Fraser Institute and co-author of Interest cost risks to government budgets.
The study answers a simple question: what would happen to government interest costs (essentially the interest paid on outstanding debt) and government budgets if interest costs returned to the almost historically low levels of 2019-20?
The study finds that the federal government and all provincial governments (except New Brunswick) would experience an increase in interest costs in fiscal year 2021-22. Combined, these costs would increase from $ 53.6 billion (the current projection based on the latest government budgets) to $ 70.6 billion, an increase of 31.7 percent.
Crucially, you also find that the federal government faces the greatest risk of higher interest costs. The increase in federal interest costs represents 77.4 percent of the total potential increase in interest costs faced by all Canadian governments.
“As the country recovers from COVID, if lawmakers want to avoid further erosion of government finances, they must exercise more control over debt-financed spending,” said Jason Clemens, executive vice president of the Fraser Institute and a co-author of the study.
Jake Fuss, Senior Economist
Jason Clemens, Executive Vice President
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Drue MacPherson, Fraser Institute
(604) 688-0221 ext. 721
The Fraser Institute is an independent Canadian public policy research and education organization with offices in Vancouver, Calgary, Toronto and Montreal and links 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 widely communicating the effects of government policies, entrepreneurship, and choices on their well-being. To protect the independence of the Institute, it does not accept government grants or research contracts. Visit www.fraserinstitute.org