Home / Finance News / Future grim for Alberta, DBRS says, with province expected to blow through debt limits this year

Future grim for Alberta, DBRS says, with province expected to blow through debt limits this year

Alberta premier Rachel Notley. Alberta's left-leaning New Democratic government in October forecast it would post a $6.1-billion deficit this fiscal year and borrow heavily to fund infrastructure.

EDMONTON — An internationally recognized credit rating agency is sounding alarm bells on Alberta’s debt situation.

The Toronto-based agency DBRS, in a report issued Thursday, says with oil prices so low and the government’s borrowing plans so high, Alberta will exceed its own self-imposed legislated debt limits this fiscal year.

The agency confirmed Alberta’s top-drawer triple-A credit rating, but said the future is grim.

“The negative trend reflects DBRS’s expectation that the continued weakness in oil prices will contribute to a material erosion in the province’s fiscal performance and accumulation of debt,” said the DBRS report.

“DBRS believes that the fiscal response is unlikely to be adequate to maintain credit metrics consistent with the AAA rating, in particular maintaining a DBRS-adjusted debt burden below 15 per cent of GDP,” it added.

“Debt is now expected to exceed 15 per cent of GDP as early as (fiscal) 2016-17.”

Alberta, under a law passed last year by Premier Rachel Notley’s NDP government, cannot borrow so much money that the total exceeds 15 per cent of its gross domestic product.

Finance Minister Joe Ceci has said that 15 per cent limit is critical to ensure that future generations of Albertans are not saddled with crippling debt payments.

But he has noted other provinces take on as much as 30 per cent.

Notley’s government, in its first budget last October, ramped up infrastructure spending to $34 billion over the next five years despite the low price of oil.


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