The Canadian experience in reducing budget deficits and debt

Canada has run persistent deficits for years and has seen its debt rise steadily. Net federal debt as a percentage of GDP has increased in the last 15 years from 30 percent to 73 percent. Interest charges alone account for almost 34 cents of every federal revenue dollar. In response, the Canadian government has taken aggressive action over the last two years.> Canada's finance minister Martin explains how Canada has addressed its fiscal problems. In the luncheon address of the bank's 1995 symposium, \\"Reducing Budget Deficits and Debt: Issues and Options,\\" Martin explained that the centerpiece of the Canadian program has been to commit to an interim deficit target on the way to an eventual balanced budget. While the interim target is ambitious, Martin is confident it will be achieved because of the strong measures contained in the two most recent federal budgets. The budgets provide for a 10 percent reduction in program spending by 1996-97, making Canada the only G-7 nation to budget an absolute decline in program outlays.> How has the Canadian government been able to bring about such sweeping fiscal reform? The most important factor, according to Martin, has been public support. The public has come to understand the severity of the problem and regards the reform measures as balanced and fair.