Arts & Life
Canstar Community News
OTTAWA — The federal budget watchdog is adding weight to Premier Brian Pallister's claim that Manitoba faces the nation’s highest debt burden.
A Thursday analysis of provincial economies shows Manitoba has the largest liquidity need over the next 18 months, relative to each province's population.
"The alternative to spending to support businesses and individuals, would be to do noting. And that also has a cost," Parliamentary Budget Officer Yves Giroux told the Free Press.
His office correlated how much provinces are spending to respond to COVID-19, along with the spending they’d already planned, through to the end of 2021.
Relative to gross domestic product (GDP), Manitoba has the highest need for financing among all 10 provinces, according to the the PBO.
The independent watchdog relied on provinces’ health spending and news releases; provincial finance departments did not formally report data to the PBO.
By GDP, Manitoba’s $2.5 billion in planned COVID-19 responses puts it as the second-top spender at 3.4 per cent, behind Quebec spending 6.5 per cent of its GDP on pandemic support.
That comes atop debt obligations that Manitoba held prior to the pandemic, which stood at 12.5 per cent of GDP for the next 18 months. The added pandemic spending now brings the need for liquidity to 16 per cent of Manitoba’s economic footprint.
Pallister said it’s a challenge for his government, and blamed his predecessors.
"Manitoba does have the highest consolidated debt – that is a challenge, for sure, and we‘re facing up to it," he told the Free Press at a news conference.
"We’ve taken significant measures to protect Manitobans first and foremost, and it’s paying off now as you see more and more of our economy emerge."
Since the first weeks of the pandemic, Pallister has asked Ottawa to start an emergency credit agency. He wants the federal government to take on debt at the lower rate it can access, on behalf of the provinces.
This Bank of Canada has instead purchased provincial debts and bonds, to allow more liquidity in the marketplace, arguing the issue for provinces is the availability of credit, not the cost of it.
Thursday’s analysis shows the central bank has purchased slightly more of Manitoba’s debt than its share of the national GDP.
Giroux connected the Bank of Canada’s moves with the fact that government bonds are still nabbing relatively low interest rates.
"That seems to be having the intended impact in ensuring that provinces, as well as the federal government, can finance and refinance themselves at low rates," he said.
"Provinces and territories, with maybe very few exceptions, have been able to refinance themselves — not as cheaply as the federal government, but as a premium that's not disproportionate compared to historical levels."
Newfoundland and Labrador faces a slightly lower need for liquidity than Manitoba, at 12.3 per cent of its GDP. Yet it’s in the rare position of not actually being able to refinance, putting it in a worse spot than Manitoba.
The PBO tally did not include the debt held by provincial Crown corporations such as Manitoba Hydro or its Newfoundland equivalent, Nalcor; it’s unclear how that would change the rankings.
In February, the PBO reported that Manitoba faces a long-term bind over demographics that will see it ineligible for equalization transfers as health-care costs continue to mount.
"As an aggregate, provinces and territories are not on a sustainable footing — but that's a different story than the short-term, immediate response to COVID-19," Giroux said.
With files from Carol Sanders
The Winnipeg Free Press invites you to share your opinion on this story in a letter to the editor. A selection of letters to the editor are published daily.
Letters must include the writer’s full name, address, and a daytime phone number. Letters are edited for length and clarity.