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The state of Canada's finances is back in focus this week with economists questioning whether the country has managed to combat a worrying rise in private debt.

An independent policy think tank, called the Fraser Institute, made headlines last Wednesday when it described concerns as "overblown," adding that there was little evidence that Canadian households were irresponsibly borrowing too much.

However, that argument is now being challenged by David Madani, an economist focused on the north American nation at Capital Economics. He called the research "misleading" as it only showed the payments on debt interest, not the principal repayments which reduce the original loan amount. Read More Oil price impact not devastating: Canada finance minister



Onerous leverage?

"Principal repayments often represent a large portion of debt obligations, especially when it comes to housing mortgage debt," he said in a note released on Monday.

"Should market interest rates rise over the next several years, as we anticipate, household debt obligations will become much more onerous."

Canada's economy has seen house prices and debt levels continue to climb despite the global financial crash of 2008. Former governor of the Bank of Canada, Mark Carney, warned of elevated household debt levels on several occasions during his tenure.

New statistics in March showed that Canadian households held roughly C$1.63 ($1.32) of credit market debt for every dollar of disposable income in the fourth quarter of 2014 – a record high, according to Statistics Canada who published the data.

The country has also had to deal with a dramatic fall in the price of oil with its economy very much reliant on the commodity. The central bank delivered a rate cut in January and market participants are gearing up for another policy meeting this week. The current governor of the Bank of Canada, Stephen Poloz, said last week that this policy was "working" and that the cut would benefit households with a mortgage.

'Fallacy'