Mounting Debt Earns Fossil-Dependent Alberta a DBRS Rating Downgrade
One day last week, Alberta Finance Minister Joe Ceci boasted about his province’s economic comeback. The next, Toronto-based bond rating agency DBRS downgraded the province’s long-term credit from AA (high), to AA, with a negative outlook.
Ceci, presenting the province’s quarterly accounts, had said its gross domestic product (GDP) would beat expectations, while its projected deficit would come in lower than forecast. According to him, JWN Energy reports, “the provincial economy had regained 41,000 of the 62,000 jobs it lost during the downturn in commodity prices,” with “around 20,000 of those in the oil and gas sector”.
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DBRS was unimpressed. Alberta, the agency said, “has yet to demonstrate any real willingness to address the weakest budget outlook among all provinces,” and was relying too much on a wished-for rebound in oil prices to rebalance its books.
The company said it was “concerned that [Ceci’s] plan to return to balance relies on a recovery in resource revenues, rather than fundamental adjustments to the budget. As a result, debt will continue to rise and there is no clarity as to when the credit profile will stabilize.”
Ceci replied in a statement that the province is “carefully tightening” its belt, while “protecting health care and education.” DBRS stood by its assertion that Alberta’s belt-tightening “will be insufficient to meaningfully address the fiscal imbalance.”
Alberta still boasts the country’s third-strongest DBRS rating, behind only British Columbia and Saskatchewan, the Globe and Mail notes.
“What is more concerning for us,” DBRS’s Paul LeBane, told the paper, “is this pace of deterioration in the credit profile. Debt is just climbing year after year and deficits are going to remain wide for the foreseeable future.”