ACTIONS TAKEN TO REDUCE THE DEBT
Debt-reduction objectives
In the March 2010 budget, the government announced debt reduction objectives. These objectives were included in the Act to reduce the debt and establish the Generations Fund in June 2010.
The November 2012 budget confirmed that these objectives will be maintained.
As at March 31, 2013, the gross debt should stand at $193.6 billion, equivalent to 54.2% of GDP. The government’s objective is to reduce the ratio of gross debt to GDP to 45% as at March 31, 2026.
As at March 31, 2013, the debt representing accumulated deficits should stand at $117.8 billion, equivalent to 32.9% of GDP. The government’s objective is to reduce the ratio of debt representing accumulated deficits to GDP to 17% as at March 31, 2026.
| 2012 | 2013F | 2014F | 2015F | 2016F | 2017F | 2018F | 2026F |
|---|---|---|---|---|---|---|---|
| 53.0 | 54.2 | 53.2 | 52.5 | 51.2 | 49.8 | 48.5 | Objective 45.0 |
| 2012 | 2013F | 2014F | 2015F | 2016F | 2017F | 2018F | 2026F |
|---|---|---|---|---|---|---|---|
| 33.0 | 32.9 | 31.5 | 30.9 | 29.2 | 27.7 | 26.1 | Objective 17.0 |
The Generations Fund
To reduce the debt, the government has the Generations Fund that was created in 2006. The amounts paid into the Fund, that come notably from the water-power royalties paid by Hydro-Québec and private hydro-electricity producers, will be used solely to repay the debt.
As at March 31, 2013, the book value of the Generations Fund should stand at $5.2 billion.
| Book value as at March 31, 2012 | 4 277 |
|---|---|
| Dedicated revenue in 2012-2013 P (Preliminary results) | |
| Water-power royalties | |
| Hydro-Québec | 627 |
| Private producers | 92 |
| Total | 719 |
| Unclaimed property | 12 |
| Investment income | 205 |
| Total | 936 |
| Book value as at March 31, 2013P (Preliminary results) | 5 213 |
To achieve its objectives the government announced in the November 2012 budget that the following revenues will be paid into the Fund:
- The revenue that will be generated by the indexation of the price of heritage pool electricity starting in 2014. This will represent $95 million in 2014-2015, $190 million in 2015-2016, $290 million in 2016-2017 and $395 million in 2017-2018.
- All mining royalties as of 2015-2016. This will represent $315 million in 2015-2016 and $360 million per year subsequently.
- The revenue, as of 2017-2018, that will stem from the increase in Hydro-Québec’s net earnings as a result of the closure of Gentilly-2 nuclear power plant. This will represent $215 million per year.
- An amount of $100 million per year, as of 2014-2015, that will be generated by the increase in the specific tax on alcoholic beverages.
The government will also reduce capital investments (a $1.5 billion annual reduction as of 2013-2014), which will help to reduce the debt growth.
An amount of $1 billion from the Generations Fund will be used in 2013-2014 to pay maturing borrowings.
The Generations Fund should stand at $13.6 billion as at March 31, 2018.
