Manitoba hit with another credit rating downgrade
REGINA, SK: The Canadian Taxpayers Federation (CTF) is calling on the Manitoba government to trim spending in wake of another credit rating downgrade. Standard and Poor’s, an international bond rating agency, lowered Manitoba’s credit rating from AA to AA- with a negative outlook.
“A credit rating downgrade makes it more likely that Manitoba will pay higher interest rates on the hundreds of millions it’s borrowing this year,” said Todd MacKay, Prairie Director for the CTF. “The provincial government has a choice: either trim spending to balance the budget quickly or wait until rising interest payments force it to cut even deeper in the future.”
Credit ratings from bond rating agencies are similar to personal credit scores. When a family misses car payments their credit score is likely to suffer and they will face higher interest payments when their mortgage is renegotiated. The same is true for governments.
The Manitoba government is projecting an operational deficit of $911 million this year. An interest rate increase of even a quarter of a per cent will cost Manitobans nearly $2.3 million every year. The province is already spending $874 million to pay interest costs on the provincial debt per year.
Standard and Poor’s also downgraded its outlook for Manitoba to negative which is a warning of further downgrades in the future.
Standard and Poor’s cited soaring debt and chronic deficits as the primary reasons for the downgrade, but also noted the lack of long-term financial projections in the recent budget. Provincial budgets typically include five-year projections that were absent in the most recent budget.
“It took years for Manitoba to get into this financial mess and it won’t be cleaned up overnight, but the recent budget increased spending,” said MacKay. “The provincial government has promised a value-for-money audit to set priorities and find places to trim spending – that critically important work needs to happen as soon as possible because Manitoba can’t afford to keep getting hit with credit rating downgrades.”