Canada debt rises to $1.67 trillion by 2030-31

The watchdog’s latest Economic and Fiscal Outlook, released Tuesday ahead of the 2026 budget, says federal deficits will run about $3 billion a year higher over the next four years than it projected in June. It also said the government’s short-term revenue boost from higher oil prices and other factors has already been spent.

Under the forecast, the deficit-to-GDP ratio edges up to 2% in 2027-28 from 1.8% this fiscal year before easing to 1.7% in 2030-31. Debt-to-GDP rises to 42.6% from 41.1% over the same period, while public debt charges climb to $83 billion from $24.5 billion in 2021-22.

The PBO says the burden of servicing debt is becoming more pronounced, with the debt service ratio rising to 13.6% of revenues in 2030-31 from 10.5% in 2025-26. On a per-capita basis, debt charges are projected to reach $1,952, reflecting low population growth and a larger debt stock.

The report also highlights a growing tension in Ottawa’s fiscal framework. The government has promised to keep the deficit-to-GDP ratio on a declining path and balance operating spending with revenues by 2028-29, but the PBO says those anchors have imposed only limited discipline. It again urged a return to debt-to-GDP as the main fiscal target, a move the IMF has also recommended.

For investors, the issue is less about a near-term funding crisis than about the direction of Canadian sovereign borrowing, future bond supply and how much fiscal room Ottawa has left if growth weakens. The combination of larger cash borrowing, rising debt service and heavier use of Crown vehicles could keep pressure on long-term yields and narrow the margin for additional stimulus in the 2026 budget.

The next test is whether Mark Carney’s government responds by tightening its fiscal targets or doubles down on off-balance-sheet delivery through Crown corporations, a choice that will shape Canada’s borrowing profile into the next decade.