The provincial government is sticking to the goal of returning to surplus by 2022-23, and although it’s a comprehensive plan, Moody’s says the challenges have increased.
Moody’s has downgraded the province’s credit rating but improved its economic outlook from negative to stable.
The vice-president and senior credit officer at Moody’s Investor Service, Michael Yake, says the challenge facing the plan to balance the books has increased slightly since last year.
He says the deficits over the next couple of years have actually increased although the return to balance is still on the same target.
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They have also highlighted that the spending reduction the province has planned is ambitious. They haven’t seen the reductions the province is trying to implement succeed in other provinces over the past 15 to 20 years.
Yake says they do recognize that sometimes spending plans can be impacted by other means. For example, if the federal government was to offer revenue that must be spent.
(Muskrat Falls Generation Facility, June 2019. Photo courtesy Nalcor.)
Minister Calls Muskrat Falls a Major Liability
Meanwhile, the finance minister says if it weren’t for Muskrat Falls, the province would be in good fiscal standing.
Tom Osborne says in 2006, the province was somewhere in the range of $4-billion in capital investment annually. Now we’re in the range of $9-billion.
Osborne says employment numbers, and many other economic indicators, are out-performing what they had in the early 2000’s.
He says the largest contingent liability is Muskrat Falls, and if he could magically make it disappear as though it had never happened, the province would be in very strong shape.
PCs Remain Skeptical
The PCs are skeptical of the province’s plans to return to balanced budget by 2022/23.
They were reacting to the Moody’s assessment which downgrades our credit rating but advances the economic outlook from negative to stable.
Minister Tom Osborne is calling on all MHAs to cooperate and fix the problem, but MHA Tony Wakeham says the PCs tried to do that and were turned down by government. They asked for the financial outlook from each department so that they could offer suggestions on how to reduce spending.
Wakeham says Premier Dwight Ball is talking the talk but not walking the walk.
Stability Key for NDP
The leader of the NDP is not at all surprised by the findings in the Moody’s report.
Alison Coffin says although it’s a lower rating, moving from negative to stable means the bond rating agency deems we are stable unless something unexpected comes up.
Coffin says their approach is to maintain the stability of the province.
She says the NDP recognizes the importance of maintaining our credit rating and the additional cost that could come with a potential downgrade of our credit rating.
