Managing the Debt

View Surplus and Debt Management Paper.

With a balanced budget in hand, Finance Minister Neil LeBlanc wants to turn the attention of Nova Scotians to debt management.

The minister released a paper today, April 18, outlining the need to maintain fiscal balance and increase annual surpluses to lower the province's $11.6-billion debt. This year Nova Scotia expects to post a small surplus. The plan also includes reducing the province's foreign-held debt and controlling capital spending.

"Delivering a balanced budget is the first step in achieving long-term fiscal sustainability. The next step is building larger surpluses so we can begin to reduce the debt," said Mr. LeBlanc.

The paper, called A Balanced Approach to Surplus and Debt Management, considers Nova Scotia's current debt and ability to pay. The primary indicator used to measure this ability is the ratio of debt to gross domestic product (GDP). Nova Scotia's debt-to-GDP ratio, at 46 per cent, is the highest in the country.

"The size of the debt is important, but a more important measure of our financial well-being is our ability to repay our debt. We see our debt-to-GDP ratio continuing to improve over the next four years, when the ratio is expected to drop from 46 to 41.7 per cent," said the minister.

The finance minister said his government has reduced the debt-to- GDP ratio in recent years by slowing the pace of debt growth, but he adds that creating conditions for economic growth are crucial.

"The key to fiscal sustainability is to grow your economy faster than your debt and to ensure that debt levels are comparable to other provincial economies. Maintaining a balanced budget will be a critical success factor in our accomplishing this," he said.

The province will achieve its target of holding no more than 20 per cent of its debt in foreign currency by 2004. The present rate is 28.9 per cent, down from 72.2 per cent in 1995.