Policy Forum: Quebec's Debt—Taming the Beast

The burden of Quebec's debt has changed significantly since 1960. While the province incurred very little debt in the years before the Quiet Revolution, its borrowing increased steadily from 1961 until the mid-1990s. By the time the trend was reversed, the Quebec government had recorded a deficit for 40 consecutive years. Having achieved one of the heaviest debt burdens, measured as a share of gross domestic product, among the Canadian provinces, and having seen two rapid downgrades of its credit rating by Moody's in the mid-1990s, fearing a further downgrade the Quebec government took steps to clean up its public finances. After outlining the evolution of Quebec's debt since the early 1960s, this article briefly describes two statutes enacted by the government to provide greater transparency with respect to the province's finances, enabling better management of its budget and debt. These statutes are the Balanced Budget Act, passed in 1996, and the Act To Reduce the Debt and Establish the Generations Fund, passed in 2006. The article discusses the impact of the Great Recession on the province's budgetary balance and indebtedness, and shows how Quebec's financial situation has changed in terms of its fiscal balance, debt, debt interest, and credit rating. It is now possible to affirm that the two statutes adopted by the government have clearly helped to improve Quebec's fiscal position.