This year the Canadian federal government will run a deficit guesstimated at $343bn. But interest rates are so low that, even though the national debt is increasing by nearly half to more than $1-trillion, Ottawa expects to spend $5bn less than last year on debt service.
Canada is borrowing more than ever and it is costing Canadians less than ever. In the worst recession since the Great Depression, that has been the silver lining. Ottawa kept the economy afloat by substituting borrowed public dollars for the private spending that evaporated when companies closed and people were laid off. Absent that, millions of Canadians would have been destitute; instead, because of programmes such as the Canada Emergency Response Benefit,But is that sort of borrowing sustainable? Yes — assuming even modest economic growth in the decades to come, Ottawa can borrow these amounts and not have any trouble carrying the debt.
But Ottawa has not discovered a bottomless well of magic money from which to draw $343bn deficits, year after year forever. Huge amounts of emergency borrowing are possible, and necessary, to end this crisis, heal the patient and return the economy to full employment. But after that, it’s back to reality.
As long as deficits in good times don’t rise to more than roughly 1% of GDP, Canada’s debt-to-GDP ratio remains stable or falls slightly. Over four years before the pandemic the Trudeau government ran about $70bn worth of deficits, yet the federal books, which started in good shape, got a bit better. But beyond that 1% of wriggle room government outlays still have to line up with government revenues.
Source: Financial Digest (financialdigest.net)
South Africa Latest News, South Africa Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
THE BOSTON GLOBE: Congress should pass voting rights actMove to include all Americans, regardless of race, would honour life of civil rights legend John Lewis
Source: BDliveSA - 🏆 12. / 63 Read more »
JSE falls as pandemic worries weigh on marketsThe US Federal Reserve kept interest rates unchanged on Wednesday
Source: BDliveSA - 🏆 12. / 63 Read more »
Rand weakens as US Fed keeps interest rates unchangedThe dollar improved on the Fed news, but the rand fell for a third straight day
Source: BDliveSA - 🏆 12. / 63 Read more »
Rand weakens as US Fed keeps interest rates unchangedThe dollar improved on the Fed news, but the rand fell for a third straight day
Source: BDliveSA - 🏆 12. / 63 Read more »
Corruption could make the IMF loan expensiveTreasury must intensify transparency if it wants to check irregular expenditure
Source: BDliveSA - 🏆 12. / 63 Read more »
Source: TheCitizen_News - 🏆 6. / 75 Read more »