Budget 2021-2022

Debt reduction

The Act to reduce the debt and establish the Generations Fund stipulates that for fiscal 2025-2026, the gross debt must not exceed 45% of GDP, while the debt representing accumulated deficits must not exceed 17% of GDP.

Given the substantial increase in the debt in 2020-2021, as a result of the significant deterioration in Québec’s financial situation due to the public health crisis, the targets are not expected to be met.

The gross debt to GDP ratio is expected to stand at 47.0% as at March 31, 2026 (a difference of 2.0 percentage points of GDP with respect to the objective of 45%).

The ratio of debt representing accumulated deficits to GDP is expected to reach 24.6% (a difference of 7.6 percentage points of GDP with respect to the objective of 17%).

Québec’s economic situation remains uncertain due to the current pandemic. Over the coming months, the government will continue to monitor the evolution of the economy and public finances. Based on this information, the government will review the Act to reduce the debt and establish the Generations Fund, particularly with regard to the achievement of the targets set for 2025-2026.

Like the 2008-2009 recession, which led to a review of the Act to reduce the debt and establish the Generations Fund, the COVID-19 pandemic will make it necessary to set new debt reduction targets.

Nevertheless, reducing the debt burden remains a priority for the government. It is a matter of intergenerational fairness. Québec is one of the most indebted Canadian provinces and it is not shielded from an increase in interest rates or another recession.

Once full employment is regained, the government will re-establish a balanced budget, expected in 2027-2028, which will help reduce the debt burden.

The Generations Fund

To achieve these debt reduction objectives, the government established the Generations Fund in 2006. The sums accumulated in the fund are dedicated exclusively to repaying the debt. The main revenue sources dedicated to the Generations Fund are as follows:

• water-power royalties paid by Hydro-Québec and private producers of hydroelectricity;
• revenue generated by the indexation of the price of heritage electricity;
• mining revenues;
• an amount derived from the specific tax on alcoholic beverages;
• investment income.

Deposits in the Generations Fund help to reduce the debt and thus to improve intergenerational fairness. That is why the government has chosen to maintain these deposits, despite the expected deficits.

In 2021-2022, deposits of dedicated revenues in the Generations Fund will amount to $3.1 billion.

As at March 31, 2022, the book value of the Generations Fund will stand at $15.0 billion.

Click here to find out more about the Generations Fund.