Depreciating loonie drives Q4 increase in Canada’s net foreign assets

Canada’s net foreign asset position increased in the fourth quarter of 2024 as the loonie lost value relative to the U.S. dollar, Statistics Canada said on Thursday.

The country’s net foreign asset position rose by $166.6 billion to $2 trillion at the end of Q4 — a fifth consecutive quarterly gain, StatCan said.

“The increase largely reflected the depreciating Canadian dollar relative to the U.S. dollar, which increased the value of Canada’s international assets by more than international liabilities,” StatCan said.

The loonie lost 6.2% against the U.S. dollar over the quarter, gaining only slightly against the euro and the U.K. pound sterling, StatCan noted. At the end of Q4, 68.8% of Canada’s international assets were denominated in U.S. dollars compared with 29.2% of its international liabilities.

That meant the assets were more sensitive to exchange rate fluctuations than the liabilities. The revaluation effect from those fluctuations amounted to $197.8 billion, StatCan said.

The growth in Canada’s net foreign asset position was “slightly” moderated by market price fluctuations (–$15.1 billion), StatCan said, as an increase in equities prices was largely offset by a decrease in debt instrument prices for both international assets and liabilities.

Year over year, Canada’s net foreign asset position grew by $570.8 billion, or 40%, in 2024, StatCan said. The increase was driven by upward and comparable revaluations resulting from market price changes and fluctuations in exchange rates, it said. Gains in 2024’s net foreign asset position were moderated by the need to borrow funds from abroad to finance the current account deficit, it said.

StatCan also said Canada’s gross external debt — the value of Canadian debt instruments held by foreign investors — increased 6.3% to hit $4.6 trillion at the end of Q4. That figure represents 145.3% of GDP, it said, which is the highest proportion since the second quarter of 2020, when the pandemic began.

The financial sector’s gross external debt, dominated by deposit-taking corporations, reached $2.7 trillion at the end of 2024, representing 58.8% of Canada’s gross external debt.

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