TORONTO, March 28 (Reuters) - Ontario will increase its already large debt burden in 2018-19 as it returns to running a deficit and adds to its investment in infrastructure, the province’s budget showed on Wednesday.
The province projects that net debt-to-GDP, which had been on a downward path and is seen as a key measure of fiscal health, will increase to 37.6 percent in 2018-19 from 37.1 percent in 2017-18 and then continue to climb until peaking at 38.9 percent in 2021-22.
The rising profile of net debt to the size of the economy came as the province, which has one of the largest sub-sovereign debts in the world, projected deficits over the coming six years in a pre-election budget that boosted spending on healthcare and child care.
It forecast a budget surplus in 2017-18 for the first time in a decade.
By comparison, the province of Quebec said on Tuesday it will tap a fund to reduce its debt by C$10 billion ($7.74 billion) over the next five years. It projected a balanced budget in 2018-19.
“I think Quebec’s yields will continue to be below Ontario for quite some time,” said Sebastien Lavoie, chief economist at Laurentian Bank.
The lower yields for Quebec allow it to borrow at a cheaper rate.
Ontario projected that investment in capital assets will rise to C$14.2 billion in the coming fiscal year from an estimated C$10.7 billion in 2017-18.
It projected borrowing of C$31.7 billion in 2018-19, which is lower than for the current fiscal year after C$11.5 billion was prefunded.
Interest on debt is forecast to rise to C$12.5 billion in 2018-19 from an estimate of nearly C$12 billion in 2017-18, while the Canadian dollar borrowing target will be maintained at about two-thirds of total borrowing, the province said. ($1 = 1.2925 Canadian dollars) (Reporting by Fergal Smith, editing by G Crosse)