Canadian companies have been accumulating “dead money” — cash sitting idle in bank accounts — faster than companies in any other country in the G7, according to a report from the International Monetary Fund.
Idle cash sitting in Canadian corporate accounts amounted to less than 10 per cent of GDP as recently as the late 1990s, but has exploded to more than 30 per cent of GDP since then, said the IMF report that came out in January and was recently flagged by PressProgress. The average cash pile among G7 countries is around 25 per cent of GDP.
Statistics Canada data released earlier this month showed Canada’s corporate cash hoard was $626 billion in the last quarter of 2013, a jump of 6 per cent over the previous quarter.
As United Steelworkers economist Erin Weir pointed out, that makes Canada’s corporate cash hoard larger than the country’s federal debt, which sat at $612 billion at last count.
“The corporate sector’s aggressive accumulation of cash helps to explain the lack of investment and employment growth,” Weir wrote.