(The federal government’s market debt, what it owes to lenders, has surpassed $1 trillion for the first time ever. (Shutterstock)

Former budget officer warns federal books at risk of fiscal shock in the face of rising interest rates

By Murray Brewster, 

CBC News Posted:

Mar 26, 2018

The federal government’s market debt — the debt on which Ottawa pays interest — has topped $1 trillion for the first time, finance department documents show.

It is a milestone, says former parliamentary budget officer Kevin Page.

The threshold, he said, highlights the urgency for the Liberal government to have a strategy to both balance the federal books and manage the debt in an era of rising interest rates.

“It’s important for Parliament to wrap its head around borrowing,” Page told CBC News.

Market debt is different from the federal debt and deficit figures, which are regularly presented to and debated by Canadians and reflects the federal government’s estimated total liabilities, or cash needs, and what must be borrowed from the markets.

Think of it like a mortgage — or the balance on a line of credit.

“It’s debt that generates interest,” Page said. “And Canadians will be surprised at how fast interest on the public debt is going to grow over the next five years.”

The market debt figure for 2017-18 does not reflect what cash, land or other assets the federal government has on hand.

“When I think of of my Ukrainian mother in Thunder Bay, [Ont.], she understands debt is going up,” he said. “Most Canadians understand that. And it’s going up by a lot.”

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