Alta., Sask. can ride out oil price fall: report

Alberta and Saskatchewan both have the financial reserves and minimal debt necessary to have their credit quality ride through a prolonged decline in oil prices, says Moody’s Investors Service in a recent report.

Both provinces carry Moody’s highest Aaa rating, and have stable outlooks, the Toronto-based credit rating agency said in a press release Wednesday.

“While both provinces have financial assets that far exceed the average for the Canadian provinces, Alberta’s financial assets, at more than three times the amount of its debt and covering 75 per cent of annual consolidated expenditures, provide a substantial buffer should there be a protracted decline in oil prices,” Moody’s assistant vice-president and analyst Kathrin Heitmann said in the release.

The report, entitled Alberta and Saskatchewan: Peer Comparison, says Alberta has accumulated more financial assets than has Saskatchewan, which has financial assets equal to 59 per cent of debt and 20 per cent of spending, as of March 2014.

However, Moody’s Alberta’s debt burden could overtake Saskatchewan’s in the next few years, as planned increases of infrastructure spending over the next two years doubles the debt load of the province from the current 24 per cent of consolidated annual revenues to nearly 50 per cent. Moody’s expects Saskatchewan’s debt to remain at 30 to 40 per cent of annual revenues.

Because of contingency accounts, low debt levels and prudent budgetary practices, Moody’s views Alberta and Saskatchewan to be in a strong position to withstand future fiscal pressure stemming from depressed oil prices, the release said.

“Prioritizing and accommodating increased spending needs as the population grows, while preserving a healthy level of financial assets will however, be a key challenge for both provinces going forward,’’ Moody’s added.