Bank of Canada advances to federal and provincial governments

There is much contention surrounding the history of the Bank of Canada making advances to the federal government and provinces.  Some claim it never happened, that although there were provisions in the Bank of Canada Act (article 18 (i) and (j)) for advances, this provision was never used.  That is incorrect, it was indeed used, multiple times.  The reason it took so long to confirm this is because the information was not on the Stats Canada tables of the Bank of Canada balance sheet (which does not go earlier than 1953), it was buried in the Canada Gazette archives.  Below is a chart of every time the BoC made advances to governments, the last being in 1961.  As you will see, the BoC had no issue giving its biggest advance for the war effort.

Date Level of government Amount 2017 dollars Per Capita
April 1935 Federal $3,000,000 $54,000,000 $4.98
June 1935 Federal $4,301,562 $77,965,811 $7.19
July 1935 Federal $1,240,625 $22,486,328 $2.07
Aug 1935 Federal $1,246,563 $22,593,954 $2.08
Sept 1935 Federal $2,759,375 $50,013,671 $4.61
Oct 1935 Federal $15,724,750 $285,011,093 $26.28
Nov 1935 Federal $2,223,375 $40,298,671 $3.72
Dec 1935 Federal $3,465,812 $62,817,842 $5.79
Jan 1936 Federal $2,195,875 $38,724,552 $3.54
April 1936 Provincial $2,000,000 $35,270,000 $3.22
May 1936-Sept 1936 Provincial $3,000,000 $52,910,000 $4.83
Oct 1936 Provincial $1,000,000 $17,640,000 $1.61
April 1938 Federal $7,000,000 $117,120,000 $10.50
Sept 1940 Federal $32,000,000 $522,000,000 $45.86
Jan 1953 Federal $15,000,000 $138,830,000 $9.35
Nov 1961 Federal $9,000,000 $74,810,000 $4.10

If you’d like to see the balance sheets from the Canada Gazette for yourself, check them out here:

BoC balance sheet 1935-1952

Municipal Improvements Assistance Act 1938, Bill 143

It has been claimed by many that the federal government never made loans directly to cities for infrastructure.  This is incorrect, one just needs to dig deep enough into the Canada Gazette archives.  There one will find the Municipal Improvements Assistance Act 1938, and the corresponding loan value on the government’s balance sheet.  The peak was in 1943 when the total value reached $3,740,716.44.  That is $53,644,340.16 in 2017 dollars, at a time when our population was only 11,795,000, making it around $4.50 for every person alive at the time.

After 1943 the government seems to have ended the program, but still has a line about loans and advances to provincial and municipal government, which continues for years afterwards.  Once upon a time federal support of local needs was much higher.  The full text of the Municipal Improvements Assistance Act is here:


Here’s a quote from 1939 about the good the Act was doing:

To complete the record I may refer to another measure adopted to stimulate the construction industry, and to help unemployment, namely, the Municipal Improvements Assistance Act.  During the eight months in which this act has been in operation, 46 loans have been approved for a total amount of $3,582,667.  Five applications are pending for a total amount of $442,731.  I have reason to know that apart from the contribution made by these loans to the relief of unemployment they have been a veritable godsend to many municipalities which have only in this way been enabled to finance much-needed improvements to productive undertakings without adding new burdens to
the shoulders of the general taxpayer.”

“34.  Under the Municipal Improvements Assistance Act, 1938, the Government approved loans prior to March 31, 1939, amounting to $3,143,000 to municipalities to enable them to finance the construction of municipal self-liquidating projects.  As at March 31, 1939, the amount actually paid out on such loans was $815,000.  These loans bear interest at the rate of 2% per annum and are amortized over a period not longer than the estimated useful life of the project.  The province in which the municipality is located is required to guarantee the payments of interest on and amortization of any such loan.”

For the budget speech this came from, please see: