Finance Minister Katrine Conroy tables the budget as Premier David Eby looks on from the legislative assembly at the legislature in Victoria on Feb. 22, 2024. THE CANADIAN PRESS/Chad Hipolito
NEW YORK – British Columbia’s credit rating has been downgraded by S&P due to concerns that big spending by the government could lead to “outsized” deficits and lower internal liquidity levels.
S&P Global Ratings says it lowered the rating for the province and BC Hydro’s provincially guaranteed unsecured debt from “AA” status to “AA-minus.”
The global finance corporation says B.C.’s 2024 budget outlined a plan for investment and spending at “record levels,” which it says will lead to after-capital deficits of more than 15 per cent of total revenues until the 2027 fiscal year.
Another global ratings agency, Moody’s Investors Service, separately revised its outlook for B.C. to negative on Tuesday.
B.C. Finance Minister Katrine Conroy says factors such as the slowing global economy may also have played a role in the S&P ratings drop, but other assessors such as Fitch Ratings have found B.C. to be on stable fiscal ground.
S&P says in its decision to downgrade the province that the company may lower the rating further “if B.C. maintains its current fiscal trajectory,” and a reversal is needed along with stronger economic growth for the outlook to be revised to stable.
It says the province’s commitment to fiscal discipline and stability have “wavered” recently as B.C. increases spending on operations and capital investment to what S&P calls “unparalleled levels” amid slowing growth.
“Considering B.C.’s focus on taxpayer affordability and on capital investment when economic growth is weakening, we expect that the province’s fiscal performance will materially deteriorate in the next two years,” S&P says.
Opposition BC United finance spokesman Peter Milobar says in a statement that the “dual downgrades” by Moody’s and S&P “are a clear sign of the NDP’s fiscal mismanagement.”
“Each downgrade under the NDP brings higher taxes and tighter budgets for British Columbians. The result is higher costs for loans, as David Eby’s policies drain our wallets,” he says, calling the downgrades “a wake-up call.”
BC Conservatives MLA Bruce Banman says S&P’s lower rating reflects the firm “losing confidence” in the NDP government’s ability to manage the province’s finances.
“The largest credit institutions in the world have taken a look into this premier’s mismanagement of taxpayer dollars, and they think he cannot be trusted,” Banman says. “British Columbia is spending an extraordinary amount of money to get less and less and less for everyday hard-working people.”
Conroy said that the capital investments noted by S&P were needed because the NDP government “inherited a deficit of infrastructure” from their BC Liberal predecessors, now known as BC United.
“What we know and what we’ve been telling investors is that we inherited a deficit of infrastructure when we formed government,” Conroy said in the B.C. legislature.
She added: “We have had to build hospitals. We have had to build schools. We have had to build roads. We have had to make housing a priority because of what we inherited.”
This report by The Canadian Press was first published April, 9, 2024.
