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Dec 4, 2020

TD's Masrani says future growth will 'look after' federal debt load

The impact of this pandemic will be felt for many years to come: TD CEO


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Alarm bells have been sounding over the Canadian government’s ballooning debt burden as it continues to deploy and extend COVID-19 relief programs. 

But the chief executive officer of one of Canada’s biggest banks believes if the right growth-oriented policies are put in place, it will offset the explosion of red ink on the federal balance sheet.

Toronto-Dominion Bank CEO Bharat Masrani said he has no doubt virus-related support measures were warranted, but how the government handles policies aimed at preserving and creating jobs over the next year and beyond will prove crucial.

“If we have growth, then the debt will look after itself,” Masrani said in an interview Friday. “As they say, growth can overcome a lot of challenges.”

The federal government is projecting a record $381-billion deficit in this fiscal year, bringing its total debt to more than $1.1 trillion. 

“Canada did have an advantage that many countries didn’t. We started, at least on the federal balance sheet side, with debt that was very manageable,” he said.

One of the sources the government is looking to for possible growth is the $170 billion that is estimated to be built up in bank accounts of Canadian individuals and businesses throughout the pandemic – something Masrani agrees could provide a major boost.

“Everybody’s hope is once things normalize, then folks are able to spend the money they’ve saved or kept in bank accounts because that in itself should provide a good start to hopefully a growth cycle for the economy,” he said.

But the federal government can’t just spend its way out of the pandemic-driven downturn, Masrani added.

Aside from how severe and prolonged the second wave of infections is, Masrani said he believes the overall business environment and how that affects consumer confidence will play an important role, especially moving into the second half of 2021 when many expect COVID-19 vaccines to be distributed.

“There’s a lot of uncertainty but I’m cautiously optimistic as we move into 2021, particularly into the second half, we will hopefully start to see more normalcy and growth in our economy which will be welcome,” Masrani said.