N.L. hikes borrowing capacity, looks to long-term loans
Provincial government facing difficult fiscal situation
The Newfoundland and Labrador government has secured a total of $1.4 billion in long-term financing since January, Premier Dwight Ball told the House of Assembly Thursday.
Previously, Ball had said he wasn't sure if the province would be able to borrow long term, because of the current economic situation.
Ball told reporters Thursday his strategy is to move away from short-term borrowing.
To help do that, the province is raising its borrowing capacity this fiscal year and next.
Ball said long-term borrowing is the preferred option "because you know what the interest rates are and there's less risk in the market."
Finance Minister Cathy Bennett said interest rates on long-term loans would range from 3 per cent to 3.8 per cent.
Their length could vary. "They could be five years, they could be 10 years and they can be 30 years," Ball said.
"[That] would all be part of the discussion that you have and of course [the term length is] what impacts the interest rates."
Tory finance critic Keith Hutchings said the Liberals have been delivering "mixed messages" about the province's finances. He was surprised by the announcement Thursday.
"We're about two weeks away from the end of the [fiscal] year and that's brought on us today," he said. "Very surprised that it would come at this date."
During question period, the Progressive Conservatives also asked about what an increased borrowing capacity would do to the province's credit rating.
"If that wasn't part of our thinking, if that wasn't part of our mindset, well then, we would not be doing the due diligence," Ball said in an interview after the house let out.
"Anytime you're into a borrowing position, anytime you're into the economic situation that we face as a province, you're concerned about all of those things."
The province's borrowing capacity was previously capped at $2 billion for the just-ending 2015-16 fiscal year. Now, with the introduction of a new bill, that number has increased to $2.4 billion, according to Bennett.
The cap for 2016-17 will be contained in another new bill, Bill 10, which has yet to be published on the House of Assembly website.
The number that is published will just be the "first amount," according to Bennett.
She said "it won't include all the borrowing we expect we may need to do for '16/17."
"We're trying to be responsible and be very careful in how much we ask the legislature to approve," she said.
With $1.4 billion in long-term funding secured, Ball said the province's short-term treasury bill debt is down to $1.77 billion from $2.7 billion.
He also said short-term loans would always be part of his "cash management plan."
All of the province's current loans are from domestic markets but Bennett said some long-term money may come from global markets.
The the province's exact fiscal situation will be outlined in the next budget.
The date of the budget has not yet been announced.