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S&P lowers B.C.’s credit rating, pointing to large deficits and high spending

Another international ratings agency, Moody’s Investors Service, independently changed its forecast for B.C. to negative on Tuesday

S&P has downgraded British Columbia’s credit rating because they are worried that the government's big spending could lead to “outsized” deficits and lower internal liquidity levels.

S&P Global Ratings has reduced the rating for the province and B.C. Hydro’s provincially guaranteed unsecured debt from “AA” status to “AA-minus.”

The global finance corporation says that B.C.’s 2024 budget showed a plan for investment and spending at “record levels,” leading to after-capital deficits of more than 15 per cent of total revenues until the 2027 fiscal year.

Moody’s Investors Service, another global ratings agency, separately altered its outlook for B.C. to negative on Tuesday.

B.C. Finance Minister Katrine Conroy suggests that factors like the slowing global economy may have also influenced the S&P ratings drop, but other evaluators like Fitch Ratings have found B.C. to have a stable fiscal foundation.

S&P mentions in its decision to downgrade the province that the company could reduce the rating further “if B.C. maintains its current fiscal trajectory,” and it will need a reversal as well as stronger economic growth to revise the outlook to stable.

It notes that the province’s dedication to fiscal discipline and stability has “wavered” recently due to increased spending on operations and capital investment at what S&P calls “unparalleled levels” amid slowing growth.

“Considering B.C.’s focus on taxpayer affordability and on capital investment with weakening economic growth, we anticipate that the province’s fiscal performance will decline significantly in the next two years,” S&P states.

Opposition BC United finance spokesman Peter Milobar states that the “dual downgrades” by Moody’s and S&P “are a clear sign of the NDP’s fiscal mismanagement.”

Under the NDP, each downgrade leads to higher taxes and stricter budgets for British Columbians. The result is higher loan costs, as David Eby’s policies deplete our wallets,” he says, referring to the downgrades as “a wake-up call.”

BC Conservatives MLA Bruce Banman states that S&P’s lower rating reflects the firm “losing confidence” in the NDP government’s ability to manage the province’s finances.

“The largest credit institutions in the world have examined this premier’s misuse of taxpayer funds and they believe he cannot be trusted,” Banman asserts. “British Columbia is spending an extraordinary amount of money to get less and less for everyday hard-working people.”

Conroy mentioned that the capital investments noted by S&P were necessary because the NDP government “inherited a deficit of infrastructure” from their BC Liberal predecessors, now known as BC United.

“What we understand and have been informing investors is that we inherited a deficit of infrastructure when we formed government,” Conroy stated in the B.C. legislature.

She added: “We have had to build hospitals. We have had to build schools. We have had to build roads. We have had to make housing a priority because of what we inherited.”

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