Another credit rating agency has maintained British Columbia’s status as a highly-ranked credit risk, as the provincial economy continues to perform well.
The Domestic Bond Rating Service (DBRS Ltd.) has confirmed the province’s long-term debt rating at AA (high) and the short-term debt rating at R-1 (high).
“All trends are stable,” DBRS Ltd. stated in a news release. “The ratings remain well supported by the province’s diverse and growing economy, positive outlook, ample fiscal capacity and low debt burden.”
DBRS’ rating comes after the international credit rating agency Moody’s confirmed in January its AAA rating of B.C., making it the only province in Canada to be rated triple A by all three international credit rating agencies (Moody’s, Standard and Poor and Fitch).
A province’s credit rating has a direct impact on a provincial government’s borrowing costs. Any downgrade to a credit rating can result in higher borrowing costs, which result from the building of infrastructure, such as roads, bridge, hospitals and schools.
This fiscal year, the B.C. government expects to pay $2.7 billion in debt servicing costs, which is about five per cent of all spending.
In its release, DBRS Ltd. lauded the B.C. government for its commitment to balanced budgets, “conservative budgeting practices” and a focus on debt affordability.
However, the agency also sounded a note of caution over not being able to draw many long-term conclusions from the NDP government’s relatively short time in office.
“With a short time in government there remains a degree of policy uncertainty as to the pace of program growth, tolerance for deficit spending through the business cycle, upcoming labor negotiations and management of the Province’s large government business enterprises,” the agency stated.
The mention of “large government business enterprises” is likely a reference to ICBC and B.C. Hydro. The provincially owned auto insurer is facing a $1.3 billion loss this year, while Moody’s has expressed concerns in the past about B.C. Hydro’s high debt levels.