EDMONTON — Alberta’s net debt-to-GDP ratio rose sharply over the past decade, but a new economic analysis says the province could see its fiscal position improve over the next 25 years if it maintains tighter control over spending.
An Economic Note published Tuesday by the MEI says Alberta’s net debt-to-GDP ratio increased by 11 percentage points between 2015 and 2024.
The report comes as provincial governments across Canada face growing fiscal pressure. In 2025, every province was running a deficit, something the MEI says had not happened since the 2008 financial crisis.
Trevor Tombe, a senior fellow at the MEI and author of the report, said the long-term condition of provincial finances will depend on both government budget decisions and broader economic conditions.
“What needs to be understood is that healthy public finances don’t just happen magically; they are the result of policy choices,” Tombe said.
“In a way, the choices we make today determine the fiscal environment in which the next generation will live.”
The report says population aging and rising health-care spending are expected to put increasing pressure on provincial finances over the next quarter-century.
Health care already accounts for roughly 40 per cent of provincial operating spending, according to the analysis, and that share is expected to rise as populations age.
Economic growth, interest rates and government spending decisions will also play a major role in determining how provincial debt levels evolve.
Tombe projects budgetary policies alone could contribute to an average increase in provincial debt-to-GDP ratios of roughly 1.5 percentage points annually over the next 25 years.
The report says an increase of that scale would be difficult to offset through stronger economic growth alone.
“In the coming decades, the provinces will face major challenges in terms of spending,” Tombe said.
“Governments need to act now to slow spending growth and ensure the viability of their programs. The longer they wait, the more painful the adjustments will be.”
The MEI says Alberta’s recent fiscal record was comparatively weak, but argues its outlook could improve substantially if current spending restraint continues.
The report says Alberta went through several years of fiscal instability before beginning to bring its finances under greater control.
Based on those changes, Tombe projects Alberta’s debt-to-GDP ratio could decline over the next 25 years.
“The scorecard for the past few years does not necessarily determine a province’s future,” Tombe said.
“Alberta shows that a change of course can bear fruit. By maintaining better budgetary discipline, the government can improve its financial prospects and give future generations a better chance.”
The MEI says provinces generally will need to find ways to slow spending growth and improve the efficiency of public services as demographic pressures increase.
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