Moody’s downgrades Alberta’s credit rating, Toews says NDP to blame

Finance Minister Travis Toews says the previous NDP government is to blame for Moody’s downgrading Alberta’s credit rating on Tuesday.

“I was disappointed to hear that Moody’s has changed Alberta’s credit rating to Aa2 (stable) from Aa1 (negative) citing lack of pipeline capacity and inherited deficits,” Toews said in a news release in which he cited the only rating of four that were upgraded, the others were all downgraded.

“This decision shows how previous government’s fiscal mismanagement and inability to gain market access for Alberta’s energy continues to affect our province.”

“Moody’s Investors Service has today downgraded to Aa2 from Aa1 the Province of Alberta’s long-term debt ratings,” the agency said on its website.

“At the same time, Alberta’s Baseline Credit Assessment was lowered to Aa3 from Aa2. Concurrently, Moody’s downgraded the long-term debt ratings of Alberta Capital Finance Authority and the long-term issuer rating of ATB Financial to Aa2 from Aa1, reflecting their status as agents of the Crown and the provincial guarantee of all their liabilities.”

Moody’s said the downgrades come in part because of what it calls “a structural weakness in the provincial economy that remains concentrated and dependent on non-renewable resources — primarily oil — which causes volatility in financial performance, and remains pressured by a lack of sufficient pipeline capacity to transport oil efficiently with no near-term expectation of a significant rebound in oil-related investments.”

The credit rating agency added that the downgrade “also reflects that continued fiscal pressures, as indicated by continued material consolidated deficits at least until 2022-23, will lead to the province’s debt burden stabilizing at a higher level than previously forecasted.”

However, Moody’s also said “the outlook on all ratings was revised to stable from negative.”

The overall downgrade is just the latest as Alberta has seen numerous such downgrades from various credit ratings agencies since the price of oil collapsed in 2014.

“Over the past four years, the previous government drove Alberta into a fiscal crisis with policies that weakened growth and business competitiveness,” Toews said. “That’s why balancing Alberta’s budget, growing the economy and creating jobs are our top priorities.”

Shannon Phillips, the NDP Official Opposition Critic for Finance, disputed Toews’ assessment of who was to blame for the downgrade.

“On the day when we finally turn the corner on market access and break ground (on the Trans Mountain pipeline expansion project)… due to Rachel Notley’s tireless efforts, we also have further proof the UCP economic plan is not working,” she said in an email to Global News.

Phillips also criticized the Kenney government’s corporate tax cuts.

“The $4.7-billion corporate giveaway has created no jobs to date, and this government’s corruption and pro-separatist rhetoric has chased away investors,” she wrote. “Plus, with cuts to social programs, Jason Kenney seems content to move our province backwards while increasing the deficit by $2 billion.

“The UCP debt is virtually the same as the NDP, but the difference is the UCP blew a hole in the budget, has no diversification plan, has presided over thousands of job losses with no end in sight.”

While unions, public sector workers and others have criticized the October budget, which sees reductions in spending, Toews reiterated his government’s belief in the fiscal plan.

“I’m pleased to say that since introducing the budget just six weeks ago, many prominent economists and financial institutions have signalled that it, along with our policies to cut taxes and reduce red tape, are getting our province back on track,” he said.

“I stand behind our government’s plan and I am confident it is the right path forward for Alberta and for all Albertans.”

Moody’s said the ratings could potentially be upgraded through “significant fiscal improvements that allows the province to accelerate its timeline to return to balance, or from a sustained reduction in debt burden.”

The credit rating agency also noted “environmental considerations are material to Alberta’s credit profile” and that it “considers environmental risk to be high.”

“Alberta’s oil and gas sector is carbon intensive and Alberta’s greenhouse gas emissions are the highest among provinces,” the agency said. “Alberta is also susceptible to natural disasters, including wildfires and floods, which could lead to significant mitigation costs by the province.

“Social considerations are also important to Alberta’s credit profile. Alberta is challenged by the typical social risks relating to advanced economies including health care, housing and education as well as very high per capita health-care spending which exert pressure on expenditures and GDP growth.”

Credit ratings affect how much interest the government pays on borrowed money.

–With a file from The Canadian Press

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