By the end of the 2024-25 fiscal year, Canada’s total market debt is expected to surpass $1.4 trillion. Every day, this debt grows by more than $100 million, and every second, Canada pays more than $1,200 in interest.Many Canadians are concerned about the growing deficit, raising concerns that Canada could, once again, be called “an honorary member of the Third World” or see its dollar be called the “Northern Peso.”Fifty-five per cent of Canadians think the federal government’s spending is too high. In spite of this, Chrystia Freeland, Deputy Prime Minister and Minister of Finance, postponed debt-reduction goals multiple times, and anticipates that the debt-to-Gross Domestic Product (GPD) ratio will keep growing for at least the next two years. For now, it seems the debt burden is here to stay, although the future of the Liberal government is uncertain with the end of the NDP-Liberal supply-and-confidence agreement.In the meantime, Canada is in a GDP-per-capita recession, a tsunami of mortgage renewals are about to crush in, and the interest rate has just been cut again, to 4.25 per cent, to keep the economy afloat.The financial ‘soup’Understanding national debt is crucial to grasping the gravity of the situation. National debt represents the amount of money a government owes its creditors. Every time a government runs a deficit, it needs to borrow to cover it. Canada runs deficits more often than not.National debt is measured as a percentage of GDP or on a per capita base. National debt can be measured in different ways, including gross debt, net debt and public deficit. Some measures include just the federal government, while others include the provincial governments.Governments have several tools at their disposal to manage fiscal deficits and debt, though each comes with its own set of challenges.Governments aim to eliminate fiscal deficits by growing the economy continuously, but this is easier said than done.Raising taxes is another option, but economic contraction, high unemployment rates, the costs of implementing fiscal consolidation, debt burdens and an increasing debt-to-GDP ratio can make this approach challenging.Financial repression involves government policies that control financial markets. These can include directed lending to the government from domestic institutions like pension funds or banks, explicit or implicit caps on interest rates, regulating cross-border capital flow, and strengthening ties between governments and banks.Inflation can be an effective tool because even if creditors are repaid, the value of the goods and services they purchase is significantly lower than when the loan was originally extended.Cost cutting can also be a possibility, but governments are often reluctant to do so because it can lead to significant changes in policy, operations and administration which, in turn, may undermine long-term goals.Other financial strategies include transferring loans, postponing and reimbursing restrictive debt withdrawal rights, leasing or revising interest rates as authorized in the debt market, domestic financial sector transfers, fiscal consolidation and debt restructuring. (ICE TORONTO)

Fonte notizia: https://www.canadianmanufacturing.com/