The federal budget watchdog is warning about the growing level of net debt being accumulated by Canada's provinces, territories and local governments.
The parliamentary budget office said Tuesday that the combined net debt of Canada's so-called sub-national governments -- currently at 32.5% of gross domestic product -- is projected to rise to more than 200% over the next 75 years.
The report warned that, at that level, debt service payments would reach 11% of gross domestic product
The sub-national outlook, which excludes the federal government, has worsened since last year due to increased spending projections for health care and public sector administration, the analysis said.
On the federal side, the office found the sustainability of Ottawa's fiscal outlook had deteriorated compared to 12 months ago. It does, however, expect the federal net debt to remain manageable and to be eliminated in 50 years.
The document also said the new government has also reduced federal fiscal room through changes to child benefits and its commitment to increase infrastructure spending.
But overall, the analysis said the combined fiscal path of the country's federal, provincial, territorial, local and aboriginal governments -- as well as their public pension plans -- was unsustainable.
During last year's election campaign, the federal Liberals vowed to balance the books by 2019-20 and to lower the country's net debt-to-GDP ratio in each year of their mandate to 27%, from 31.2% in 2015-16.
The ratio, also known as the debt burden, represents a government's capacity to pay back debt.
The Liberals' March budget, however, did not specify when Ottawa would eliminate the deficits and only projected the net debt-to-GDP ratio to start falling after the next election in 2020-21 -- and only to 30.9%
