22 billion wasted in interest costs with the federal debt

For the first nine months of the current fiscal year, from April to December 2023, the interest bill on the federal debt has already surpassed the $35 billion mark.

At the rate that interest accrues, or even at a rate of 4 billion per month, the federal debt charge bill should reach 47 billion by the end of the 2023-2024 budget year, or 22 billion more than it was during the 2021-2022 fiscal year. year.

We're talking here about an interest bill that would nearly double the bill from two years ago, before the Bank of Canada started tightening monetary policy.

This means that the single impact of the staggering increase in the Bank of Canada's key interest rate on federal debt will cost us collectively during this budget year an astronomical $22 billion in additional interest costs. This will of course be the same in the next fiscal years 2024-25, 2025-26, etc.

No, but what a waste of public money!

Trudeau's mistake?

You will tell me that this is Justin Trudeau's fault, with his numerous and expensive measures to financially help victims of the COVID-19 pandemic.

We must warn: almost all Canadians have benefited from these measures, which have required spending several hundred billion dollars.

Yes, the federal debt grew dramatically after this package was implemented. Today, it has reached nearly $1,200 billion.

Or at the Bank of Canada?

To combat inflation in the wake of the Covid-19 pandemic, central banks have resorted to their preferred remedy: tightening their monetary policies. The Bank of Canada has clearly followed in the footsteps of the US Federal Reserve and other central banks by raising their key interest rate significantly.

This rose from 0.25% at the start of March 2022 to 5.0% 16 months later, in July 2023. This caused interest costs to rise significantly on all loans, from individuals, businesses and governments.

The Trudeau government must now finance federal debt at a rate at least twice what it was before March 2022.

When Tiff Macklem, governor of the Bank of Canada, says he will have a hard time bringing down inflation if governments don't get their spending under control, I remind him that he himself is responsible for the severe inflation caused by high interest costs.

At the federal level alone, higher key interest rates cost us an additional $22 billion a year in interest costs. To this must be added another batch of billions in additional interest costs that provincial governments must pay on their debt.

And the belief that these tens of billions of additional dollars will only fill the coffers of bankers and investors!