Moody's Upgrades Provincial Credit Rating

Another major international bond rating agency has acknowledged the government's efforts to keep Nova Scotia's finances on track.

The highly respected Moody's Investors Service has raised the province's debt rating to A2 from A3, citing improvement in Nova Scotia's provincial debt indicators, economic gains of recent years and the government's commitment to maintaining balanced budgets and achieving debt reduction. The rating outlook is stable.

The revised rating from Moody's follows similar upgrades by two other bond rating agencies over the last year. Standard & Poor's Rating Services increased its credit rating for Nova Scotia on Aug. 20 and the Dominion Bond Rating Service issued an upgrade in late 2003.

A higher credit rating makes the province's bonds more attractive to investors and helps lower the overall cost of borrowing. Even with a balanced budget, the province must borrow money to manage the existing Nova Scotia debt.

"It is encouraging that all three major bond rating agencies have recognized our progress in managing the province's finances," said Finance Minister Peter Christie. "We have worked hard in the last five years to ensure Nova Scotia's financial position continues to improve, and we remain committed to that goal."

In a news release issued Wednesday, Sept. 1, Moody's noted a number of positive fiscal and economic trends in Nova Scotia:

• Nova Scotia's economic gains as measured by Gross Domestic Product (GDP) growth in the five years ending 2003 matched those of Canada as a whole, reflecting performance notably better than the previous five years;
• Government enacted legislation in 2004 to implement a debt reduction plan. It is committed to achieving a reduction of government debt by 2007-08, by generating surpluses to close the gap between budget results and cash requirements;
• The province has reduced its exposure to liabilities such as Nova Scotia Resources Ltd and Sydney Steel Corporation;
• From 1993-94 to 2003-04, the ratio of debt to GDP has dropped from 51.7 per cent in to 40.9 per cent, and foreign currency exposure has declined from 42.1 per cent to 15.4 per cent.

Moody's said the future course of Nova Scotia's credit rating depends on continued careful management of some significant fiscal and economic challenges. These include slower-than- expected offshore oil industry growth and the need to keep salary increases for government employees to a reasonable level.

"Strong fiscal management means that government will have the resources to invest in the things that Nova Scotians care about -

• like better health care, quality education in the classroom and programs for those in need," said Premier John Hamm.

"I would like to thank Nova Scotians for their dedicated effort and their sacrifices as we have made the tough choices to improve the province's finances."