Ontario, Canada’s largest province, had its credit rating cut by Standard & Poor’s, which said the government’s plan for one of the largest infrastructure outlays in Canadian history will weaken the balance sheet for years to come.
S&P lowered Ontario’s rating one level to A+ from AA-, according to a statement Monday.
The rating firm said even if the Liberals’ manage to close their operating deficit by 2018 as promised, their 10-year plan to spend C$130 billion ($108 billion) on transit, hospitals and other public infrastructure means its debt load will accumulate. S&P expects debt to rise to a “very high” 267 percent of revenue in the next two years.
“While some domestic and international peers display very weak budgetary performances or very high debt burdens similarly, it is the combination of both that sets Ontario apart from the group,” the rating firm said in the statement. “Ontario’s budgetary performance remains very weak.”
The governing Liberal Party has pledged to gradually reduce the operating deficit without slashing jobs and social services while initiating an ambitious spending program.
“Today’s low interest-rate environment and historic under-investments make today an ideal time to invest in infrastructure,” Finance Minister Charles Sousa said in a statement. “Our plan is sensible and it is working.”
While the deficit has been dropping, the province’s total debt outstanding has been rising and now
stands at about C$315 billion, according to the Ontario Financing Authority. Ontario’s C$250 billion of long-term bonds rated by Moody’s Investors Service is the most of any province, state or local government in the world, the New York-based company said last year. Moody’s has an Aa2 credit rating on the province, two levels above where S&P’s rating, on watch for possible downgrade.
Ontario Cut by S&P as Big Spending Makes It Global Laggard - Bloomberg Business
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