Provincial governments have been shifting the structure of their debts toward longer terms to maturity. In this way, they are able to postpone the need to refinance their debts at higher interest rates, if rates were to rise. However, in the long run all of the government’s debt eventually matures. More revenue going to interest payments on the debt means less is available for programs that taxpayers value, such as health care and education, or tax relief. This study analyzes the budgetary implications of interest rate risks faced by the governments of Ontario and Quebec, Canada’s two largest provinces and the most indebted as a share of GDP.
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