The Financial Accountability Office of Ontario says the Province’s net debt will rise by over $50 billion by 2020-21 to $350 billion.
The rise is expected largely because of the Province’s 12-year $160-billion capital plan.
The Province’s debt burden is one of the highest among provincial governments in Canada.
Ontario’s net debt increased significantly during the 2008-09 recession, and grew by $139 billion between 2007-08 and 2015-16.
Ontario’s liabilities include non-market and market debt, which consists mainly of publicly held bonds, treasury bills, and US commercial paper issued in Canadian dollars and foreign currencies.
Given the characteristics of Ontario’s debt (composition, interest rates, when it is due to be repaid and currency in which it is issued), interest rate risk is the most important risk associated with the Province’s debt.
There is uncertainty surrounding the future level of interest rates due to market fluctuations and Ontario’s credit risk. All else equal, an increase in interest rates would lead to higher interest payments, which would reduce the Province’s fiscal flexibility.
The provincial budget only projected the net debt out to 2018-19, when it was forecast to hit $326.8 billion.
The government still remains committed to eliminating a $5.7-billion deficit next year.