Net debt: gross debt minus financial assets, per cent of GDP. Interest costs: interest paid on each government's gross debt (the interest rate times last year's debt), per cent of GDP. Income from financial assets is counted in revenue, not netted off here. A fiscal adjustment or closing the gap lowers debt and so lowers interest costs too.
Dotted: net debt if the fiscal gap is closed from , reaching the debt target at the horizon.
A permanent change in revenue or program spending, as a share of each government's GDP, applied every year from the start year to every government shown. Higher revenue or lower spending (a negative number) lowers net debt. Solid lines include the adjustment; faint grey lines show the path without it.
Each line shows the permanent change in the primary balance needed to reach the debt target (set under Target in the assumptions) by the horizon, if the adjustment starts in a later year. Waiting means debt and interest costs build up in the meantime, and fewer years remain to make up the difference, so the adjustment gets larger.
Each year's change in net debt (per cent of GDP) is split into three parts that add up exactly: the primary deficit (spending other than interest, minus revenue), interest costs on gross debt, and the effect of economic growth, which shrinks the debt ratio when the economy grows. A fiscal adjustment, if set on the Net debt paths tab, is included.
What is a fiscal gap?
The fiscal gap is the immediate and permanent change in a government's primary balance (revenue minus program and capital spending, as a share of GDP) needed to bring its net debt to a target share of GDP by the end of the time horizon. By default the target is each government's own ratio; it can instead be zero or a ratio you choose (the same for every government). A positive gap means revenue increases or spending cuts of that size are needed; a negative gap means there is room to cut taxes or spend more. The adjustment is the same share of GDP in every year, starting in .
The gaps are not forecasts. They show what current policies imply under the stated assumptions, so readers can see how much depends on each one. Use these results with more than a few grains of salt: small differences in long-run assumptions compound over decades.
Net debt paths
Net debt is gross debt minus financial assets, as a share of GDP, measured at the end of each fiscal year. The paths show what happens if current policies continue with no adjustment. Financial assets are held fixed in dollar terms (their income is part of revenue), so they shrink relative to the economy over time. With the gap closed, the primary balance is higher by the fiscal gap every year from , which brings net debt to the target at the horizon.
The fiscal adjustment option lets you try a policy change of your own: a permanent change in revenue or program spending, as a share of GDP, starting in the year you choose and applied to each government shown. It raises the primary balance by the revenue change minus the spending change in every year from then on, and the lower debt also means lower interest costs. Below the chart, the tool reports how much of each fiscal gap would remain. Years shown shortens the chart without changing the fiscal gaps.
The cost of waiting
The fiscal gap assumes the adjustment starts in . The Cost of waiting tab shows the permanent adjustment needed to reach the same debt target at the horizon if it starts later. Each year of delay adds to debt and interest costs and leaves fewer years to close the gap, so the required adjustment grows, and grows faster the longer the wait and the higher the interest rate relative to growth.
Why debt changes
Each year's change in the net debt ratio is split exactly into three parts: the primary deficit (program and capital spending minus revenue), interest costs on gross debt (the interest rate times last year's debt, relative to this year's GDP), and economic growth, which lowers the ratio by g/(1+g) times last year's net debt. Interest costs are on gross debt because income from financial assets is already counted in revenue. When interest costs exceed the growth effect, debt rises even with a balanced primary budget. The Net debt paths tab can also show interest costs as a share of GDP.
Assumptions and controls
- Population projection
- Population by age, sex and province follows Statistics Canada's 2025-based projection scenarios (Table 17-20-0003), reproduced with a cohort-component model using the same fertility, mortality, immigration, emigration, non-permanent resident and interprovincial migration assumptions. The medium scenarios (M1–M6) differ only in their interprovincial migration patterns; low and high growth, slow aging and fast aging change the other components too.
- Interest rate
- A constant average nominal interest rate on provincial debt. The federal government borrows at a rate 1 percentage point lower. The rate affects only debt costs, not revenue or spending.
- Labour productivity growth
- Annual growth in real output per worker. Nominal GDP in each province grows with its population, the share of that population aged 15 to 64 (so aging slows growth), 2% inflation, and labour productivity.
- Health cost growth above inflation
- Provincial health spending grows with inflation, population and each province's changing age structure, plus this extra annual rate per person (0% to 2%, in steps of 0.1 points).
- Canada Health Transfer
- The legislated path: 5% growth a year through 2027/28, then growth with a three-year moving average of nominal GDP, with a 3% floor. The faster option adds 1 percentage point a year through 2032/33.
- Oil and gas outlook
- Resource royalties in British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador follow the value of oil and gas production (production times benchmark prices) in the Canada Energy Regulator's Canada's Energy Future 2026, to 2050, and grow with GDP after that. The four choices are the CER's scenarios: current measures (the default), Canada net-zero, and higher and lower oil and gas prices. Royalties are assumed to be a constant share of the value of production, so the progressive royalty rates on oil sands projects are not captured. Equalization responds to the change in resource revenue through its formula.
- Provincial revenue
- By default, personal and corporate income taxes, sales taxes and payroll taxes grow with provincial GDP. Other own-source revenue follows its own drivers: fees and other revenue with inflation and population, investment income with inflation, fuel taxes with real GDP, tobacco taxes with inflation, and resource royalties with the oil and gas outlook chosen above. These tend to fall as a share of GDP. The alternative grows all provincial own-source revenue with GDP. Federal transfers follow their own formulas in both cases.
- Other assumptions (not adjustable here)
- Inflation is 2% a year. Equalization follows its legislated formula, including the fiscal capacity cap. Federal defence spending rises from 2% of GDP in 2025/26 to 3.5% by 2035/36. Federal direct program spending is held flat to 2030 (Budget 2025), then grows with inflation and population. Atlantic Accord payments to Newfoundland and Labrador continue to 2056. The territories are not included in “All provinces”.
Methodology
The projections come from the Finances of the Nation debt sustainability model, which projects each province's revenue by source and spending by function, federal revenue and spending, and federal transfers (including equalization) to , starting from data. The approach follows Tombe (2020), “Provincial Debt Sustainability in Canada”, Canadian Tax Journal 68(4), updated with current data and policies. The model was run for every combination of the population, productivity, Canada Health Transfer and oil and gas settings (360 runs). The other settings are calculated in your browser using the same formulas as the model: interest rates affect only debt costs, so the fiscal gaps and debt paths for any interest rate and horizon follow from each run's primary balances; health spending is stored separately so any rate of health cost growth can be applied; and the revenue option switches between two stored revenue paths. The fiscal gaps match the full model to within 0.0001 percentage points.
Changes from the earlier version
- The interest rate and time horizon can now be set to any value in their range (), rather than a few fixed steps.
- New net debt paths for each government, with the option to show the path with the gap closed and to pin a scenario for comparison.
- A data table and CSV downloads, and shareable links to any scenario.
- The net debt chart can show 25, 50 or 75 years, include a fiscal adjustment of your own, and show interest costs.
- New Cost of waiting and Why debt changes views.
- A choice of debt target: today's ratio, zero, or a ratio you choose.
- November 2026: a choice of oil and gas outlook (the Canada Energy Regulator's 2026 scenarios); health cost growth set in steps of 0.1 points; the time horizon in 5-year steps.
Data sources
- Statistics Canada, Canadian government finance statistics (Tables 10-10-0016, 10-10-0017, 10-10-0024 and 10-10-0005) and non-financial capital stocks (Table 36-10-0450).
- Statistics Canada, population estimates (Table 17-10-0005) and components of growth, and population projection assumptions (Table 17-20-0003).
- Canadian Institute for Health Information, National Health Expenditure Trends (health spending by age).
- Finance Canada, federal transfers to provinces and territories.
- Canada Energy Regulator, Canada's Energy Future 2026.
How to cite
Questions or comments? Contact Trevor Tombe at ttombe@ucalgary.ca.
Licence
The underlying source data remain subject to their own licences: the Statistics Canada Open Licence, CIHI's terms of use, and the Open Government Licence – Canada.