Nfld. & Labrador

As province gets stable credit ratings, finance minister says can't cut services for surplus

With a second credit rating agency giving the province a stable outlook Thursday but calling for government to cut spending, the finance minister says it's not that easy.

Tom Osborne is no longer promising the province will reach surplus in 2022-23

Finance Minister Tom Osborne says the province is getting good interest rates from lenders thanks to stable credit ratings, including the latest from DBRS on Thursday. (Katie Breen/CBC)

With a second credit rating agency giving the province a stable outlook Thursday but calling for government to cut spending, the finance minister says it's not that easy. 

And Tom Osborne is no longer promising to reach surplus in 2022-23. 

"I won't risk getting back to surplus if it means closing hospitals where people need them," said Finance Minister Tom Osborne on Thursday afternoon. 

"We're going to provide the services that people need, but at the same time we are focused on providing fiscal stability and ensuring that tomorrow looks brighter than yesterday." 

In a press release, DBRS confirmed Newfoundland and Labrador is at A (low) with all trends remaining stable, and said the government has "maintained its plan to balance the provincial budget by 2022-23."

If it was about political popularity, we'd still have a $2 billion deficit and we'd have a majority in the House.- Tom Osborne

Although it noted the fiscal and economic outlook are challenging, the government has "significantly reduced annual budget deficits and slowed the pace of debt growth."

That's with a budget shortfall of $577 million in 2019-20 without the renewed Atlantic Accord, "down from a peak shortfall of $2.2 billion in 2015-16."

Still, the agency said structural measures are needed to cut government spending. But that doesn't mean the province will immediately cut spending to reach the once-promised surplus in a few years, although Osborne said they're "still working towards returning to surplus." 

Can't sacrifice services: minister

Osborne said with DBRS and S&P giving the province stable credit ratings, and Moody's going down slightly, the province actually got better interest rates on borrowing than it has in recent years and is in a "very good place" with lenders. 

"The same as a person sitting at home, their credit rating will determine what level of interest they'll pay when they get a mortgage or a car loan, our bond ratings, to a large degree, determine what level of interest we pay when we borrow money on behalf of the people of the province," said Osborne. 

"We won't sacrifice services in making decisions solely focused on our bond ratings. They are important, but we still have to provide the services that are important to the people of the province." 

Credit rating agencies say hydroelectric project Muskrat Falls in Labrador is the biggest single financial liability for the province. (Nalcor Energy )

Osborne noted all three credit rating agencies continue to cite the over-budget hydroelectric project Muskrat Falls as the province's single biggest financial challenge, but said they support the government's efforts to tackle that liability.

"If it was about political popularity, we'd still have a $2 billion deficit and we'd have a majority in the House. We've made tough decisions, we've paid a bit of a price for making those tough decisions," Osborne said. 

Banking on oil

Osborne said the province is moving away from the fiscal crisis of 2015-16, and he has "a great deal of optimism for Newfoundland and Labrador."

Despite mounting concerns internationally about what many call a climate crisis, Osborne said with 94 explorations wells and the oil industry confident one in six of them will be profitable, "we've got a bright future." 

He added the province is "dealing with the federal government on Bill C-69," which imposed tougher environmental requirements for things like offshore oil extraction.

Especially with Muskrat Falls power, Osborne said the province is at 98 per cent green energy while the world transitions to a greener economy. 

"For the next 40 or 50 years we are going to need to use oil as a globe," according to the province's oil partners, Osborne explained, using planes and boats as examples of that need. 

"Our oil is amongst the cleanest in the world, [carbon dioxide] levels for our oil offshore are amongst the best in the world."

Read more from CBC Newfoundland and Labrador

With files from Katie Breen

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