Let's take as an example the province of Quebec in Canada with a debt of $273B. It just elected a conservative and nationalistic government to lead the next 4 years. Their platform is that of fiscal prudence and tax reduction. There is a lot of debate around the need to lower the state's debt versus investing more into services and increasing said debt.

With that in mind, I have a few questions for you all:

Who owns all this debt? What happens when the state falls into the red? Is it possible for the state to no longer be able to borrow? Is there a finite amount it can borrow?

  • $\begingroup$ Although the question text correctly labels Quebec in one place as a province, the title and rest of the question use “state”. Barring independence, this is incorrect, and misleading in that Canadian provincial finance is very different than that of American states. Using “state” for both blurs a distinction that should be made. $\endgroup$ Oct 10, 2018 at 22:29
  • $\begingroup$ @BrianRomanchuk The reason behind the name is to appeal to the US-centric audience. I use state/province interchangeably as both represent the same type of governing body but neither controls the money supply, so they are restricted in how they can issue debt. $\endgroup$
    – Dimitry
    Oct 11, 2018 at 15:21
  • $\begingroup$ My concern is that the details are very different, and thus the answers are different. I used to work as an analyst in a provincial bond portfolio, so I can cite myself as an authority... $\endgroup$ Oct 12, 2018 at 14:31

1 Answer 1


I’ll offer brief answers to the sub-questions.

“Who owns the debt?” You might be able to find information in Canada’s financial accounts data, but all provinces are likely aggregated. Finance Quebec may voluntarily post some information on holders, but I am unaware of any sources in the public domain.

“What happens when a province falls in the red?” Canadian provincial finance is very different than American state finance. If “fall in the red” means “runs a fiscal deficit,” the province will just issue bonds.

“Is it possible for a province to no longer borrow?” Unlike American states, there are no balanced budget laws in Canadian provinces. The “limit” is the inability to float bonds in the bond markets. The Social Credit government in Alberta was forced to default in the Great Depression (1930s), and I believe that was the only post-Confederation (1867) provincial default. (It’s hard to find an authoritative reference for that statement, sorry.)

“Is there a finite anount it can borrow?” The only limit is what it can get from auctioning bonds to investors. There is no iron law determining an upper limit for that, but realistically debt levels will be compared to past history and the situation of other provinces.

A single province is relatively small when compared to aggregate borrowing/lending in the Canadian dollar financial system. Therefore, a province is unlikely to hit some aggregate “limit,” rather it is a question of whether investors are willing to allocate their portfolios towards the province. For example, if investors fear default, they will not be happy to lend, no matter how much balance sheet capacity they have to buy bonds. Discussing the aggregate lending capacity is controversial, and I am deliberately ducking that question. That should be a separate question.

  • $\begingroup$ Thanks for your answer, Brian. I assumed the limit would be related to the size of the savings accounts and a bank's multiplying effects. I guess that any province/state can also increase the return on bonds to improve the chance of expiring bonds to be purchased again. Just some thoughts. $\endgroup$
    – Dimitry
    Oct 11, 2018 at 15:23
  • $\begingroup$ My answer does not attempt to answer what determines the limits of the bond markets to lend. Since a single province is relatively small, it’s not going to strain aggregate lending capacity. $\endgroup$ Oct 12, 2018 at 14:33

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