Credit-rating agency warns of further downgrade, one day after fiscal update

Credit-rating agency DBRS Limited had some ominous words about a downgrade for Alberta one day after the NDP government issued its most recent fiscal update.

The agency had previously given Alberta a negative outlook and warned of a potential further credit downgrade for the government in the absence of a sustained effort to address the provincial deficit and debt through revenue or cost-cutting measures.

In Wednesday’s first-quarter fiscal update, NDP Finance Minister Joe Ceci said the deficit would stand pat at $10.5 billion despite a drop in revenue spurred by lowerthan-expected oil prices, but only through dipping into the contingency fund and finding new inyear savings.

In a report released Thursday on the impact of low oil prices on Alberta, Saskatchewan and Newfoundland and Labrador, DBRS noted that Ceci had reaffirmed the government’s commitment to maintaining public services and employment and did not spell out where the in-year savings would be found.

“The deterioration in the commodity price outlook increases the likelihood of a negative rating action,” said DBRS, which currently gives Alberta a AA (high) rating.

DBRS is one of three rating agencies, along with S&P Global Ratings and Moody’s, that have downgraded Alberta’s credit rating under the NDP government. Lower ratings make it more expensive for the government to borrow.

The most recent downgrade came from S&P in May, as it lowered Alberta’s rating two notches, to A+ from AA.