Canada, widely recognized as a prosperous, advanced, and diversified economy, currently faces a significant financial challenge: its corporations held the highest debt levels globally as of 2025, according to my research.
Methodology
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Data pipeline
The charts presented here utilize "live" data, automatically refreshing whenever the Bank for International Settlements updates its source information. Running this underlying data pipeline is highly cost-effective, costing under $0.05 daily. For more details on the mechanism, refer to the case study: Bank for International Settlements data pipeline case study.
Debt service ratio
My preferred metric for debt measurement is the "debt service ratio." This ratio represents the percentage of an entity's gross disposable income allocated to debt payments. For instance, if an individual's after-tax income is $100,000 annually and their yearly debt payments total $20,000, their debt service ratio would be 20%, or 0.2. While various debt metrics exist, I find this one to be the most useful.
Corporate debt service ratio by country
When analyzing financial stress on the "real economy," it is crucial to focus on the debt service ratio of private, non-financial corporations. The chart below illustrates this ratio for Canada alongside several other advanced economies. Financial corporations, such as banks, must be excluded because their core business of high leverage and credit intermediation would otherwise lead to a double-counting of debt and distort the assessment.
Canada, France, the Netherlands, and Sweden are the top 4 countries by this measurement. The USA and UK are included in the chart for context.
What about households?
The chart below shows the household debt service ratio of Canada, compared to a few other advanced economies. You can change the countries shown on the chart with the filter control on the right.
Canada has the third highest household debt service ratio right now, but it is far behind #1 and #2 on the list - Norway and Australia. Norway in particular has seen household debt service ratio skyrocket, because most of their mortgages are tied to NIBOR, which is an interest rate benchmark for interbank lending in Norway. This means that residential loans in Norway are particularly sensitive to the Norges Bank policy rate, which rose dramatically in 2023.
Combining the two ratios
We can combine household and non financial corporate debt service ratios to get the total debt service ratio of the non governmental sector.
Below is a chart showing the countries with the highest total private debt service ratio, as well as the US and UK. Technically, Hong Kong has the highest ratio, but I find its economic situation to be linked to China in a way that distorts the ratio.
Canada stands out as having the third-highest total private debt service ratio, driven by a combination of high corporate indebtedness, the highest globally, and a significant household debt burden. While Canada's household debt is substantial, the corporate sector's exceptional leverage is the primary factor pushing the country toward the top of the combined private sector rankings, signaling broad financial pressure across both non-financial businesses and households.
Takeaways
Canada faces a unique financial situation characterized by exceptionally high private sector debt, driven primarily by its corporate sector.
- Corporate Indebtedness is Extreme: Canadian non-financial corporations currently hold the highest debt service ratio among all advanced economies reviewed. This indicates a high proportion of corporate income is being used for debt servicing, which can constrain investment, hiring, and overall economic resilience in the event of an economic downturn or prolonged high interest rates.
- Significant Household Debt Burden: While not the global leader, Canada's household debt service ratio is also among the highest, ranking third after Norway and Australia. This substantial debt load limits consumer spending power and increases the sensitivity of the Canadian economy to interest rate hikes.
- Total Private Sector Pressure: When combining both corporate and household metrics, Canada ranks third globally for the total private debt service ratio (excluding the anomalous case of Hong Kong). This pervasive indebtedness across both major non-governmental sectors suggests broad financial vulnerability.
- Implications: The combination of top-tier corporate debt and high household debt makes the Canadian economy particularly susceptible to economic shocks. High debt service costs could accelerate any slowdown by simultaneously forcing corporations to pull back on operations and households to cut consumption.
