OTTAWA — Canada’s top banker and the Pallister government disagree on the best way to help provinces borrow money.
"I don’t really think the cost of financing is the issue, it’s the availability, given that markets are demanding liquidity," Bank of Canada governor Stephen Poloz told the Free Press on Friday.
On Thursday, Manitoba Premier Brian Pallister said he would ask the federal Liberals to establish an emergency credit agency, to extend loans to provinces at a cheaper interest rate than what they could access on their own.
The premier said the COVID-19 pandemic could cause Manitoba to borrow $5 billion to get through the fiscal year that begins April 1.
Poloz said Friday the central bank’s measures this week to buy provincial securities will likely be more effective at stabilizing provincial cashflows, compared with establishing a new agency. "The obvious advantage is that we can do it at the drop of a hat," he said.
The central bank started purchasing provincial treasury bills Wednesday at an issuing rate of 40 per cent, though it might change the rate based on market conditions.
"We’ll keep doing it until conditions are normalized. (It’s) as simple as that. And (the) size is whatever market conditions demand," Poloz said.
The Pallister government had argued the measures are a good way to help out Canada’s banks, without doing much to support the provinces. The measure doesn’t provide liquidity, "and only applies to a very small volume of our total debt needs," a Manitoba spokeswoman wrote on Friday.
"The provinces are all unnecessarily competing with each other, chasing the few bond deals that are available."
The Manitoba government said a central agency could pass along savings so provinces could invest in health care and other responses to the novel coronavirus.
Poloz acknowledged provinces’ bond-market pressures, but responded by saying interest rates remain low.
Manitoba said that the province’s interest rate had risen in the past month.
Federal Finance Minister Bill Morneau said he’s in touch with his provincial counterparts weekly, to make sure the health systems have enough funding to respond to COVID-19.
"We know this challenge is placing pressures on provinces; we know that we need to work together on the health challenges, first and foremost, and make sure they’re resilient," Morneau said.
Your support has enabled us to provide free access to stories about COVID-19 because we believe everyone deserves trusted and critical information during the pandemic.
Our readership has contributed additional funding to give Free Press online subscriptions to those that can’t afford one in these extraordinary times — giving new readers the opportunity to see beyond the headlines and connect with other stories about their community.
To those who have made donations, thank you.
To those able to give and share our journalism with others, please Pay it Forward.
The Free Press has shared COVID-19 stories free of charge because we believe everyone deserves access to trusted and critical information during the pandemic.
While we stand by this decision, it has undoubtedly affected our bottom line.
After nearly 150 years of reporting on our city, we don’t want to stop any time soon. With your support, we’ll be able to forge ahead with our journalistic mission.
If you believe in an independent, transparent, and democratic press, please consider subscribing today.
We understand that some readers cannot afford a subscription during these difficult times and invite them to apply for a free digital subscription through our Pay it Forward program.