An agency is maintaining Alberta’s credit rating but says the outlook for the long-term is negative because of the government’s unwillingness to deal with its deficit and growing debt.
DBRS Limited says the rating remains at AA-high, but the trend on long-term ratings has been changed to negative from stable and the province could face a downgrade within a year.
“The negative trend reflects that Alberta continues to erode its low debt advantage through sustained deficit spending,” the agency said in a release Friday. “Moreover, the province has yet to provide a credible plan to restore balance.”
Credit ratings affect how much governments pay to borrow money. Alberta had a $10.8 billion deficit last year and is forecasting a $10.3 billion deficit this fiscal year.
Finance Minister Joe Ceci has said the NDP government hopes to balance the budget by 2024.
DBRS said it is not convinced this can be achieved even though Alberta’s economy is improving and appears to have turned a corner supported by a modest rise in oil prices.
“Given their reluctance to use additional tax room and the continued focus on maintaining services and funding growth, this objective is highly uncertain since it relies on a sustained recovery in economic activity buoyed by higher oil prices.”
Watch below: Alberta shouldn’t bank on surge in oil prices: report
Ceci responded to the DBRS rating by accentuating the positive.
“DBRS has maintained our AA-high credit rating, recognizing our province’s strong fiscal fundamentals and the many positive economic trends and signs of recovery happening in our province right now,” he said in a statement.
“Alberta’s economy is expected to lead the country this year in economic growth, and jobs are returning. Our balance sheet remains the strongest in Canada and we continue to have the lowest debt-to-GDP ratio among the provinces.”
Ceci’s statement did not address the agency’s concerns or its warning about a possible credit rating downgrade in the coming year.
He said Albertans should remember that the province’s credit rating is among the highest in Canada and the government will continue spending on needed infrastructure projects and public services.
“We will continue to restrain spending below population growth plus inflation and, as the economy continues to recover, the deficit will decrease over time.”
Opposition Wildrose Leader Brian Jean said the DBRS release is the latest warning by bond rating agencies about government spending and debt.
He said it should prompt the NDP to take action to get Alberta’s finances in order.
“The NDP should take steps to reduce spending,” Jean said in a release. “Another credit downgrade – our sixth in just two years – would severely hurt borrowing rates and core government services.”