The Legault government will take $5 billion from the Generations Fund to pay off some of Quebec’s debt, which should result in savings of $801 million over five years.
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Quebec will withdraw $2.5 billion from the fund this year and $2.5 billion in 2024-2025.
“These withdrawals will help […] to reduce debt service in the current context of high interest rates,” reads the budget presented yesterday by Finance Minister Eric Girard.
“It’s a proactive adjustment in the face of rising interest rates, as the average person does,” commented Sébastien Lavoie, chief economist at Laurentian Bank.
The government plans to spend nearly $9.5 billion on interest on its debt between 2023 and 2024, compared to $10.1 billion last year.
In 2022-2023, new Quebec loans bore an interest rate of around 3.8%, compared to 1.9% a year earlier.
Established in 2006, the Generations Fund currently holds $19.2 billion. It is managed by the Caisse de dépôt and recorded a return of -7.9% in 2022.
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The debt melts more slowly
To fund part of the tax increases, Quebec will reduce its payments to the fund, which will fall from $3.4 billion last year to $2.4 billion in 2023-2024.
This reduction, which will continue over several years, means that it will take the government 15 years instead of 10 to reach its net debt reduction target. Quebec is projected to account for less than 28% of GDP by 2037-2038, compared to 37.4% currently and 42.2% in 2021.
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