Finance Minister Travis Toews says the previous NDP government is to blame for Moody’s Investors Service downgrading Alberta’s credit rating on Tuesday.
Toews said he was “disappointed” that Moody’s lowered Alberta’s credit rating to Aa2 from Aa1.
“This decision shows how previous government’s fiscal mismanagement and inability to gain market access for Alberta’s energy continues to affect our province,” he said in a news release.
Toews noted that the report cited a “lack of pipeline capacity and inherited deficits.”
“Moody’s Investors Service has today downgraded to Aa2 from Aa1 the Province of Alberta’s long-term debt ratings,” the agency said on its website.
“At the same time, Alberta’s Baseline Credit Assessment was lowered to Aa3 from Aa2. Concurrently, Moody’s downgraded the long-term debt ratings of Alberta Capital Finance Authority and the long-term issuer rating of ATB Financial to Aa2 from Aa1, reflecting their status as agents of the Crown and the provincial guarantee of all their liabilities.”
“It’s not a huge downgrade, but it could mean that down the road it might cost the government a little bit more to borrow, and it’s more the optics of it,” Elizabeth Smythe, a political science professor at Concordia University, said Wednesday as she compared the evaluation to a report card.
Moody’s Investors Service said the downgrades come in part because of what it calls “a structural weakness in the provincial economy that remains concentrated and dependent on non-renewable resources — primarily oil — which causes volatility in financial performance, and remains pressured by a lack of sufficient pipeline capacity to transport oil efficiently with no near-term expectation of a significant rebound in oil-related investments.”
The credit rating agency added that the downgrade “also reflects that continued fiscal pressures, as indicated by continued material consolidated deficits at least until 2022-23, will lead to the province’s debt burden stabilizing at a higher level than previously forecasted.”
In its report, Moody’s Investors Service addressed the UCP’s fiscal plan, referring to its “spending restraint to balance the budget,” its corporate tax reduction and the elimination of the carbon tax, which it said would “pressure revenues over the next few years.”
Those factors, in combination with the credit rating agency’s opinion that oil investment and revenues are out of the government’s control, saw the firm conclude that the government’s “fiscal projections are subject to material execution risk.”
However, Moody’s Investors Service also said “the outlook on all ratings was revised to stable from negative.”
Get breaking National news
“This downgrade is entirely self-inflicted [and comes] as a result of the decisions taken by this Jason Kenney government,” Opposition Leader Rachel Notley said Wednesday.
The overall downgrade is just the latest as Alberta has seen numerous such downgrades from various credit ratings agencies since the price of oil collapsed in 2014.
“I think Alberta’s been slow. I think we’ve had various failed efforts to diversify,” Smythe told Global News.
READ MORE: Alberta’s credit rating downgraded by DBRS: ‘all trends negative’
“Over the past four years, the previous government drove Alberta into a fiscal crisis with policies that weakened growth and business competitiveness,” Toews said. “That’s why balancing Alberta’s budget, growing the economy and creating jobs are our top priorities.”
Shannon Phillips, the NDP Official Opposition Critic for Finance, disputed Toews’ assessment of who was to blame for the downgrade.
Phillips also criticized the Kenney government’s corporate tax cuts.
“The $4.7-billion corporate giveaway has created no jobs to date, and this government’s corruption and pro-separatist rhetoric has chased away investors,” she wrote. “Plus, with cuts to social programs, Jason Kenney seems content to move our province backwards while increasing the deficit by $2 billion.
“The UCP debt is virtually the same as the NDP, but the difference is the UCP blew a hole in the budget, has no diversification plan, has presided over thousands of job losses with no end in sight.”
While the parties pointed fingers at one another, the premier blamed the downgrade on financial institutions “buying into the political agenda emanating from Europe, which is trying to stigmatize development of hydrocarbon energy.”
Speaking on Corus Radio’s Danielle Smith Show, Kenney said the decisions were based on “distorted, torqued data provided by green left pressure groups.”
READ MORE: Doctors worried about Alberta government’s proposed cuts, changes to compensation
While unions, public sector workers and others have criticized the October budget, which sees reductions in spending, Toews reiterated his government’s belief in the fiscal plan.
“I’m pleased to say that since introducing the budget just six weeks ago, many prominent economists and financial institutions have signalled that it, along with our policies to cut taxes and reduce red tape, are getting our province back on track,” he said.
“I stand behind our government’s plan and I am confident it is the right path forward for Alberta and for all Albertans.”
Moody’s Investors Service said the ratings could potentially be upgraded through “significant fiscal improvements that allows the province to accelerate its timeline to return to balance, or from a sustained reduction in debt burden.”
The credit rating agency also noted “environmental considerations are material to Alberta’s credit profile” and that it “considers environmental risk to be high.”
“Alberta’s oil and gas sector is carbon intensive and Alberta’s greenhouse gas emissions are the highest among provinces,” the agency said. “Alberta is also susceptible to natural disasters, including wildfires and floods, which could lead to significant mitigation costs by the province.
“Social considerations are also important to Alberta’s credit profile. Alberta is challenged by the typical social risks relating to advanced economies including health care, housing and education as well as very high per capita health-care spending which exert pressure on expenditures and GDP growth.”
Credit ratings affect how much interest the government pays on borrowed money.
–With files from Global News’ Breanna Karstens-Smith from The Canadian Press
-
![]()
Alberta Budget 2019: Alberta to use budget to get ‘fair-deal’ for province -
![]()
Alberta Budget 2019: Finance Minister asks public sector to ‘work with us’ -
![]()
NDP calls for emergency debate on health care layoffs, Kenney says opponents treating budget cuts like the ‘the apocalypse’ -
![]()
Alberta Chambers of Commerce responds to budget and state of province -
![]()
Alberta cities concerned after policing budget shortfall, Calgary mayor spars with UCP minister on Twitter on issue -
![]()
Post-secondary budget fallout -
![]()
NDP and CTF share some similar views on Alberta budget -
![]()
Alberta Budget 2019 impacts city funding -
![]()
Edmonton and Calgary mayors express frustration over budget -
![]()
Edmonton Mayor Don Iveson voices concerns with Alberta budget 2019 -
![]()
Alberta budget 2019: Finance minister addresses lifting cap on post-secondary tuition -
![]()
Political scientist Duane Bratt weighs in on Alberta budget 2019: ‘This was not a shock’ -
![]()
Alberta budget breakdown in less than 1 minute
Comments