The Picture of Provincial Debt: Part 7, Quebec
Quebec is known as one of, if not the poorest province in Canada. Quebec’s total government gross debt is currently at $183.4 billion, which is about 54.6 per cent of their GDP. The net debt of the province, which subtracts the province’s assets that contribute to their total wealth, is $114,122 billion, which is 34 per cent of the province’s total GDP. And while that’s close to being the highest in Canada, it actually comes in second – just behind Ontario. Debt servicing is included in the 2013-2014 budget, with about $8.6 billion going towards paying off the province’s debt. At that rate, it will take about 22 – 23 years for the province of Quebec to get completely out of debt.
So how did Quebec get into this much debt? Unlike many other provinces, such as Ontario – the most indebted province, and the one hit hardest by the recession – Quebec didn’t really feel harsh repercussions from the recession itself; and those years from 2007 – 2009 don’t have a lot to do with the accumulation of Quebec’s debt. The unemployment rate did not rise dramatically during the recession, and Quebec had higher than average employment insurance benefits for those that did draw on the program. The province also saw a relatively low increase of social assistance cases than other provinces, theoretically leaving them in better shape than others.
However, Quebec was hit another way during the recession; and that’s with a sharp increase to the cost of living in the province. While inflation sat at 0.6 per cent, food prices climbed 5.2 per cent; with vegetables alone seeing a 10.7 per cent rise. And, even though Quebec still holds the lowest rental costs in all of Canada, the average rent on a two-bedroom apartment in Gatineau and Quebec City climbed 2.8 per cent.
This led to many residents struggling just to make ends meet, and Quebec also say a rise of 26.9 per cent in bankruptcies during the recession; and food bank use rose 8 per cent.
Most of Quebec’s debt is owed somewhere right in the province – either to its residents, or to its bank and financial institutions. This debt is in the form of bonds it has issued for retirement plans, mutual funds, or to banks and credit unions. The retirement plans that the provincial government has promised to many of public sector servants simply don’t have the funding to back it up. Of course, Quebec does owe a small portion of debt outside of the province, but it’s estimated that about $159.5 billion, or 98.6 per cent, of Quebec’s debt is due within Canada. And the majority of that, within the province itself.
Many people think that because Quebec’s debt is owed largely within itself, that it can simply cancel out the debts and significantly lower its debt. However, this would only hurt the province, and the people within it, even more so. Because much of that debt lies in things such as retirement plans, the government would need to pull those – and renege on their promise to take care of its residents during the years in which they have no income.
But while Ontario may be beating Quebec for the province that carries the most total debt, when you look at debt per capita, or debt per person, the situation in Quebec only gets worse. That’s because here, they come out the winner – even if only by a few thousand. In Quebec, the total debt per capita stands at $38,725; whereas in Ontario it’s $35,550. If either were it’s own country, these numbers would be great reason to worry, as the debt per capita in the United States stood at $40,000 just before their collapse.
Quebec may not be the poorest province, but they are certainly in bad shape and need to come up with a way quickly to start paying down their debt. And the fact that the debt actually lies within the province; as well as the picture of how it’s hurt its residents in the past few years, certainly shows that Quebec’s debt may be some of the worst kind of provincial debt there is.
The ten biggest cities in Quebec are:
A little later on, we’ll be taking an individual look at all these cities, and the debt picture within them.