An associate professor of business at Carleton University in Ottawa says Newfoundland and Labrador is headed for trouble if it continues on its current spending path.
The province is mired in debt to the tune of over $15-billion. Interest costs are one of the largest expenditures in the budget.
Ian Lee notes that the Parliamentary Budget Office, an arm of the federal government, crunched the numbers and found that all provinces except Quebec are in bad financial shape but that Newfoundland and Labrador is the worst of all.
To put it in perspective, he says the City of Ottawa has a debt of about $3-billion. A million people live in Ottawa while only 500,000 live in Newfoundland and Labrador.
He says provinces cannot go bankrupt but they can become insolvent.
Insolvent is a technical term which means that you cannot pay your bills when they become due which would happen if and when the bond markets refused to buy the bonds of Newfoundland and Labrador. He notes that it happened with Greece eight years ago and it happened with Puerto Rico.