Finance Committee on March 26th, 2018

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Albas, you have about six minutes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you to all of our witnesses for the work you do for our country.

Just in regard to the previous conversation with the Minister of Finance, obviously Canada does have a debt and it is set in the next year to go over $1 trillion.

Could we just have a breakdown of what is federal debt, and what is market debt, and what should the interest payments be in 2018?

[The Chair, Liberal, Wayne Easter]

Mr. Moreau, the floor is yours, sir.

[Nicolas Moreau, Director, Funds Management Division, Financial Sector Policy Branch, Department of Finance]

First, I'd like to clarify that when you referred to the $1-trillion market debt, it also takes into consideration the debt of the crown corporations. You need to distinguish the federal debt, or the debt of the federal government by itself—which is about $700 billion right now—and you need to add about $330 billion to capture the crown's debt. Basically that's the way that you would come closest.

This is the market debt, so that's the debt that is financed on the market. Basically it's different from the net debt that we often refer to when you look at the net debt-to-GDP. This is basically the overall debt of the government plus some of its liabilities, which you net out of the assets the government owns right now.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I would say that the majority of those assets, though, are not like traditional assets where you can just put them on the market and sell, because obviously there is a reason why government is retaining those.

[Nicolas Moreau]

The liabilities, we could finance them if we want. It's only that we finance as we go. It's mostly linked to a pension plan. Basically, every year we need to pay more than what we receive in some cases, so that's why we finance it on an annual basis and we don't pre-fund those liabilities.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

For the interest payments for this next fiscal year that we're coming into, what are they projected to be at?

[Nicolas Moreau]

Right now, I could say that the average interest rate that we pay on our debt is 1.2%, so the interim interest payment in terms of billions of dollars I think is around $13 billion that we will need to pay.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

Again, I've seen the number $26 billion. Is that something that you've seen?

[Nicolas Moreau]

I don't know what you're referring to.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay.

Again, it's my understanding that we spend about....

Yes, please.

[Nicholas Leswick]

Sorry, that would be not just interest on market debt, but interest on other interest-bearing debt, such as our pension and benefit obligations. That is a group of about a quarter billion dollars in debt that we also incur interest charges on. It's different from a coupon payment that we pay on the market side, but it's still interest-bearing debt.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Is it expected to accelerate faster over the next year?

[Nicholas Leswick]

Which, debt obligation?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Yes.

[Nicholas Leswick]

I can get back to you on that. I would assume it's probably market debt, but it's hard for me to answer that with certainty. I can follow up with the clerk on that one.

[The Chair, Liberal, Wayne Easter]

Great. Thank you.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

First of all, since the government came into office, how much debt has it added and what should be expected? What is the current five-year projection from this year's budget?

[Nicolas Moreau]

That's information we can find in the budget right now in terms of deficit projection.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Yes, I would like it read into the record, please.

[Nicholas Leswick]

Nick, I have the answer.

On a running basis, our cumulative change in the financial position since 2015-16 fiscal year.... Sitting as of today—so we're leading up to closing the 2017-18 fiscal year towards the end of the week—we will have rallied around $36 billion in accumulated net debt.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

And the five-year plan presented...?

[Nicholas Leswick]

It's about $114 billion.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Is it $114 billion or $115 billion?