Canada now has the third-lowest borrowing costs in the G7 after three decades of debt reduction

Canada has shifted from carrying the second-highest debt burden in the G7 to the third-lowest, a reversal that has strengthened the country's appeal to investors and lowered its borrowing costs relative to other wealthy nations.

In 1995, Canada's central-government debt stood at 64 percent of GDP, second-highest in the G7. By 2024, that figure dropped to 52 percent — the only G7 country with a lower debt burden than it carried three decades ago, according to research from the C.D. Howe Institute. Over the same period, the G7 average climbed from 61 to 97 percent of GDP, widening the gap between Canada and its peers.

The C.D. Howe Institute, a non-partisan economic think tank, argues that this fiscal restraint has strengthened Canada's borrowing advantage — a benefit policymakers should preserve by continuing to reduce the debt burden and renewing the Bank of Canada's inflation-targeting agreement. The institute notes that Canada's lower debt load makes government borrowing cheaper than in other wealthy nations, reducing the cost of financing public services and infrastructure. However, the research does not specify the exact cost differential between Canada and other G7 members or what specific actions should be taken beyond continued debt reduction.