The debt level of Canadian governments is a hot-button political and economic topic, and both high and low numbers get thrown around.
So who’s telling the truth? Well, both sides are. And since no single number tells the whole story, we need to look at multiple measures. Gross debt shows total exposure to rising borrowing costs, net liabilities shows overall solvency, and net debt excluding CPP/QPP shows how much room governments have to respond to the next crisis.
Opinion: Canada must resist the seduction of more borrowing and rising debt
In this article, “governments” means the federal plus provincial, territorial and municipal governments, combined. Canada borrows almost entirely in its own currency, avoiding the exchange-rate crises that have hit foreign-currency borrowers elsewhere.
A government that owes money in its own currency can always ask the central bank to create money and buy up that debt, but doing so has undesirable side effects, showing up as either higher headline inflation or inflated asset prices that can build into bubbles, damaging the currency’s long-run credibility and raising future borrowing costs.
Official gross debt has trended higher since 2008, and at 132 per cent of GDP is now the highest since 1997, excluding the pandemic years. Net financial liabilities, which weigh all governments’ financial assets against their liabilities, tell the opposite story: they’ve declined since 1997, hitting a low of 19 per cent of GDP in 2025 before ticking up to 21 per cent today.
The main driver is the pension assets of CPP and QPP, now roughly a quarter of governments’ financial assets. CPP and QPP assets have grown less from active fund management than from broad equity market gains.
If we exclude CPP and QPP, net liabilities for governments sit at about 50 per cent of GDP today, similar to where they stood in 2006. They’re worth stripping out because their large assets count toward net debt, while their future pension promises don’t count as a liability anywhere, since accounting rules treat them as adjustable by legislation, not as debt.
Three trends emerge: gross debt is rising, net debt is falling, and net debt excluding pension assets shows no clear direction. The third may matter most, since it nets liabilities against assets while leaving out funds that are legally earmarked for pensioners and can’t be redirected by any one government’s decision.
Canada currently enjoys notably lower borrowing costs than the U.S., a reversal from much of the late 20th century, helped in part by the fiscal discipline it showed between 1990 and 2008.
Gross debt is high, but the asset side of the ledger leaves real room for reassurance. But that comfort is no licence for governments, especially Ontario and Quebec, already among the world’s most indebted sub-national borrowers, to let their debt-to-GDP ratios drift higher.
Borrowing to fund something that genuinely expands the economy, like productive infrastructure, can pay for itself and leave the ratio unchanged or lower in the long run.
Borrowing simply to cover today’s spending does not, and that’s the kind of debt governments should treat as a last resort.
Hanif Bayat, PhD, is the CEO and founder of WOWA.ca, a Canadian personal finance platform.