Low and steady: N.L. credit rating stable after spending cuts

DBRS credit agency has given Newfoundland and Labrador a credit rating of A (low).

Sign of confidence, says Finance Minister Cathy Bennett

Finance Minister Cathy Bennett says the rating shows credit agencies have confidence in the province's debt and spending strategy. (Eddy Kennedy/CBC)

Newfoundland and Labrador's credit rating is seeing a small improvement, going from negative to stable.

That's welcome news after a few recent downgrades from credit agencies.

"[The rating is a] good indication that they have confidence in the plans that we have in place," Finance Minister Cathy Bennett told CBC News on Monday.

"And while we continue to have a significant deficit per capita and debt per capita, I'm pleased that the rating agencies believe that the work that we're doing is going incrementally in the right direction."

The Dominion Bond Rating Service (DBRS), an independent and privately held credit ratings agency, released its rating on Friday. It gave the province and its long-term debt rating an A (low) — this time last year, credit agency Moody downgraded the province from Aa2 to Aa3 — and confirmed all trends remain stable. 

"The ratings confirmation reflects DBRS's view that the considerable progress being made to reduce budgetary deficits and slow debt growth are sufficient to maintain financial metrics within an acceptable range for the current ratings," the agency posted on its website.

"An uncertain outlook for global commodity prices and continued cost overruns at the Muskrat Falls hydroelectric project present downside risks."

According to a press release from the provincial government, credit agency Standard & Poor (S&P) also affirmed the rating — giving it a long-term A and short-term A-1 — and revised its outlook from negative to stable.

Bennett said the credit ratings mean the cost of the province's borrowing will be contained, but added the government needs to continue working to improve the rating.

Right now, the province is spending more on interest and debt payments than education, Bennett said.

"It's a huge item of what we spend … so focusing on improving our ratings helps lower that and, in the long run, allows us to have more money for health, education, transportation, roadwork, etc."

With files from Peter Cowan