Global credit rating agency DBRS Ltd. (DBRS) has confirmed Manitoba’s credit rating and recognized the government’s efforts to fix the province’s finances and return to balanced budgets.
“As a result of our work, by the end of this fiscal year the accumulated provincial debt will be $5 billion lower than it would’ve been if we continued down the misguided path of the previous government,” said Finance Minister Scott Fielding. “We will be saving Manitobans $183 million per year in borrowing costs. This means we can have greater flexibility to invest in the priorities of Manitobans including health care, education, social services and capital projects.”
In its May 2019 report, DBRS notes the province’s credit profile is stable and has improved in recent years with the government’s efforts to address chronic deficit spending, and preliminary results for 2018-19 showing a significant improvement over the previous fiscal year.
The report states DBRS is confident in the government’s commitment to balance the budget over the medium term. It notes there is clear evidence of a strong political commitment and a record of budget out performance, referencing the numerous reforms the government has introduced to improve program outcomes and cost effectiveness, and strengthen budget and financial management practices.
DBRS acknowledges the province’s efforts to improve its budget forecasts and increase its resiliency to unforeseen spending requirements including significant changes to the budget development process, and increased oversight and monitoring. These measures have contributed to fewer adverse expense variances and the better-than-expected results, the report notes.
While the province has made significant progress over the past three years, there is still important work to do to return the budget to balance in the government’s second term, said the minister. The province’s debt-servicing costs continue to rise, exceeding $1 billion in 2018-19 for the first time in Manitoba’s history, with the considerable borrowing of funds required to sustain ongoing capital projects.
“The previous government’s overly aggressive and imprudent pursuit of major capital investments by Manitoba Hydro continues to threaten the financial health of our province,” said Fielding. “We have noted in the past, within a few years Manitoba Hydro will be facing more than $700 million of higher annual expenses when the carrying costs of these ill-advised projects come online. Not surprisingly, our ratings agencies continue to express concerns over Manitoba Hydro’s weak financial metrics, which continues to place significant pressure on the province’s own credit profile.
“We are taking careful and measured approach to ensuring the spending decisions made are sustainable, because we know it is essential to protecting our long-term ability to invest in the services Manitobans value and rely on.”