B.C. government debt projected to be four times higher than a decade ago

British Columbia’s government net projected debt is on track to be four times higher by 2027-28 than it was a decade prior, amounting to residents paying billions annually in debt interest payments.

Source: Wikimedia Commons

British Columbia’s government net projected debt is on track to be four times higher by 2027-28 than it was a decade prior, amounting to residents paying billions annually in debt interest payments alone.

The Fraser Institute, an economic think tank, published a study to “illustrate the opportunity cost of BC’s debt” on Monday.

To make its calculations, it assesses what the provincial sales tax (PST) rate could be if net debt were zero, and whether program spending had grown by inflation and population growth.

The study made its calculations dating back to 2016/17, which marked the end of a period of “relative spending restraint.”

It found B.C.’s nominal net debt (total debt minus financial assets) is projected to reach $155.3 billion by 2027/28, a sizable jump from $38.2 billion in 2016/17.

“Just a decade ago, B.C. had among the lowest government debt of any province, but thanks to the provincial government’s increased spending, that’s no longer the case and British Columbians are paying the price,” said Tegan Hill, co-author of the study.

Taxpayers will pay $5.1 billion in interest payments to service the debt this year.

However, had the net best been zero this fiscal year, the PST rate would be at 3.65 per cent, as opposed to the 7 per cent, where it currently sits.

If this had been the case, it would have been equivalent to each B.C. taxpayer having $1,228 in annual savings and $2,770 in annual savings for a couple with two children in 2025/26.

Additionally, if the B.C. government’s program spending had grown only by inflation since 2016/17, net debt would be “significantly reduced,” with a PST rate of 5.9 per cent, and the same level of net revenue.

“In short, nearly half of the PST British Columbians pay each year amounts to the province’s debt interest costs,” reads the study.

That could have saved each unattached British Columbian an estimated $399, and a couple with two children approximately $902 per year.

“Government debt comes with real costs for British Columbians as taxpayer dollars are redirected to paying debt interest costs rather than other opportunities, such as tax relief,” said Hill. “British Columbians need to understand how much they’re paying every year as a result of Victoria’s ballooning debt.”

The province’s credit rating fell last year, with S&P Global Ratings downgrading it for the third time.

S&P Global Ratings changed the province’s credit rating from AA to AA- in April 2024, putting it on par with countries like Slovenia and Estonia. Another credit hit would have B.C. join countries like Kuwait and Bermuda in the A+ rating

“The negative outlook reflects a one-in-three chance that we could lower the ratings in the next two years if, in our view, the province’s commitment to fiscal consolidation continues to waver, as reflected by persistent large after-capital deficits,” said the credit rating agency at the time.

The agency added that B.C.’s credit rating could be lowered further if it maintains its current fiscal trajectory, consisting of sizable deficits and free cash flow less than 40 per cent of the following year’s debt service.

“Lack of a medium- and longer-term view and commitment to ensure fiscal sustainability could also affect the rating,” added S&P Global Ratings.