Provincial governments facing higher debts and more financial pressure

After riding a red-hot economy to shrink deficits and grow surpluses, provincial governments across the country are beginning to see their finances flounder.

Total provincial net debt is expected to climb by more than $65 billion this upcoming fiscal year, which is a record annual increase and more than twice the underlying budget deficit, according to BMO.

Alberta is in the healthiest financial shape when compared to other provincial governments because of its expected budget surplus for the upcoming year (2024-25) and it's relatively low rate of debt-to-GDP.

"Population gains of recent years have created immense pressure on public infrastructure that will continue to weigh on provincial finances through at least the medium term," she said.

The most recent data from Statistics Canada shows the Canadian economy grew a modest 0.2 per cent in February, with early estimates for March indicating little change to the GDP.

The Bank of Canada has said it is getting closer to cutting interest rates as inflation shows signs of coming down and economic growth slows.