Update on Québec’s Economic and Financial Situation — Fall 2018
The Act to reduce the debt and establish the Generations Fund was passed on June 15, 2006 with the goal of reducing Québec’s debt burden.
The Generations Fund is a fund dedicated exclusively to repaying Québec’s debt.
So as not to leave future generations the burdensome legacy of having to repay the public debt, the debt reduction objectives to be achieved for 2025-2026 were set in the Act to reduce the debt and establish the Generations Fund.
The debt reduction objectives included in the Act to reduce the debt and establish the Generations Fund are as follows:
The Update on Québec’s Economic and Financial Situation confirms that these objectives are being maintained:
As at March 31, 2018, the gross debt was $201.1 billion, or 48.2% of GDP. The debt burden is expected to decline gradually and steadily over the five-year forecast period. The ratio of gross debt to GDP will stand at 42.0% as at March 31, 2023.
As at March 31, 2018, the debt representing accumulated deficits stood at $114.6 billion, or 27.5% of GDP. As a proportion of GDP, the debt representing accumulated deficits began decreasing in 2013-2014 and will continue to decrease over the coming years, reaching 20.3% as at March 31, 2023.
In order to finance the Generations Fund, we have turned to our most important renewable collective resource: water, Québec’s blue gold.
The Generations Fund is financed by revenue sources dedicated to debt repayment and consisting of, in particular, water-power royalties from Hydro-Québec and private producers of hydroelectricity.
The Generations Fund also receives sums relative to the indexation of the price of heritage electricity, an additional contribution from Hydro-Québec, mining revenues, the specific tax on alcoholic beverages, the liquidation of unclaimed property administered by Revenu Québec, a portion of the proceeds of government asset sales, and gifts, legacies and other contributions received by the Minister of Finance.
The Act also allows the government to order that a part, which it establishes, of any sum that would otherwise have been attributed to the General Fund of the Consolidated Revenue Fund be allocated to the Generations Fund.
The sums allocated to the Generations Fund are deposited with the Caisse de dépôt et placement du Québec and managed in accordance with an investment policy determined by the Minister of Finance in collaboration with the Caisse. The income thus generated on these investments helps to grow the Generations Fund and pay the debt down more quickly.
In the Update on Québec’s Economic and Financial Situation, the government provides for accelerated debt repayment.
A sum of $8 billion from the Generations Fund will be used by spring 2019 to repay borrowings on financial markets.
With the $2-billion repayment at the beginning of fiscal 2018-2019, $10 billion from the Generations Fund will have been used to reduce the debt on financial markets by spring 2019.
Taking into account the deposits made since its creation and those forecast for the coming years, as well as the use of the fund to repay borrowings on financial markets, the Generations Fund will reach $17.1 billion as at March 31, 2023.
(1) Actual data for 2017-2018 and forecasts for subsequent years.
Note: The government will use $8 billion from the Generations Fund in 2018-2019 and $2 billion in 2019-2020 to repay borrowings on financial markets.
The government’s December 2018 update provided for the following deposits in the Generations Fund:
For more information, see the following budget papers:
The two following links will open a PDF document in a new window
Click here to find out more about Québec’s debt.