Agency Cites Costs, Deficit for Downgrading Manitoba Credit Rating

Agency Cites Costs, Deficit for Downgrading Manitoba Credit Rating

By Steve Lambert, The Canadian Press

Manitoba Legislative Building
The Manitoba Legislature in Winnipeg, Saturday, August 30, 2014. (THE CANADIAN PRESS/John Woods)

WINNIPEG – The Manitoba government has had its credit rating downgraded for the second time in 13 months by S&P Global Ratings.

The international bond-rating agency said the province continues to post large deficits, which are adding to a long-term debt left by the former NDP government.

“The downgrade reflects the large, expenditure-driven structural deficits currently facing Manitoba,” S&P wrote in a release Monday.

“The current government … has laid out a seven-year path back to operating balance mostly through restructuring its cost base. While these steps bode well for strengthening budget performances in the medium term, they will not prevent the government from posting large after-capital deficits over the next two years, in our view.”

The change reduces Manitoba’s rating to A-plus from double-A-minus. Last July, the same agency cut Manitoba’s rating to double-A-minus from double-A.

Credit ratings affect how much interest governments pay on money they borrow. Finance Minister Cameron Friesen said the exact amount caused by credit change has yet to be worked out, but comes at the same time as central interest rates worldwide are starting to rise.

“Obviously, there’s going to be a cost to this in terms of dollars and cents. We’re still running calculations on exactly what it will mean,” Friesen said Monday.

The former NDP government started running deficits in 2009 with a plan to balance the books by 2015. It pushed back the target repeatedly and remained in the red, despite raising the provincial sales tax to eight per cent from seven in 2013.

The Progressive Conservatives swept to power last year on a promise to cut the sales tax by 2020 and balance the budget four years later. The province plans to make a small dent in the red ink in this year’s budget — the projected $840-million deficit is $32 million less than last year.

Friesen said the government remains committed to its cost-cutting and tax-cutting plans and will continue to look for ways to curb spending.

“We are going to get this budget back in balance. We know it’s going to take some time.”

The Tories have faced controversy over spending cuts since taking office. They have cut management positions in the civil service and Crown corporations, kept a lid on funding to municipalities, post-secondary institutions and other bodies and have announced plans to close some emergency rooms and other front-line services.

The NDP, now in opposition, rejected a request Monday to interview former premier Greg Selinger, who continues to hold a legislature seat. Instead, the party issued a statement from finance critic James Allum, who warned Premier Brian Pallister against further spending cuts.

“Pallister should not use this development to further attack front-line workers or make new cuts to front-line services, such as health care and education,” the statement read.

“Instead, Pallister should be taking a balanced approach to reducing the deficit that grows the economy and creates good jobs.”

With the credit downgrade, Manitoba’s rating under S&P Global Ratings is the same as Alberta’s, which was dropped two notches in May. S&P cited projected deficits and rapidly growing debt as the reasons.

Alberta has taken a significant hit to its revenue in recent years due to low oil prices, but the government has opted not to cut spending on services such as education and health.

CP - The Canadian Press


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