Moody's Upgrades Provincial Credit Rating

A major bond rating agency has upgraded Nova Scotia's credit rating, citing "significant improvement" in the province's debt ratios.

Moody's Investors Service has increased the province's rating to A1 from A2, with a stable outlook.

"The upgrade reflects adherence to a disciplined fiscal plan that is generating annual consolidated surpluses and leading to a significant improvement in the province's debt ratios," Moody's said today, Aug. 2, in a news release.

The rating agency cited a number of factors that have contributed to improved financial results for Nova Scotia, including:

• the 2005 decision to use the $830 million associated with the federal-provincial offshore agreement to retire maturing debt rather than enhance program spending
• surplus budgets for 2006-07 and previous years
• sustainable transfers from the government of Canada
• a debt to gross domestic product (GDP) ratio that has declined from 48.6 per cent at March 31, 2002, to an estimated 34.3 per cent at March 31, 2006.

"We are pleased that our efforts to improve Nova Scotia's finances have been recognized with a rating upgrade," said Premier Rodney MacDonald. "We remain committed to our fiscal plan, which includes the commitment to ensure Nova Scotia's debt will not grow after this fiscal year."

Moody's noted that Nova Scotia will continue to face ongoing budgetary challenges related to spending pressures, especially for health care, but it expects the province to "continue to follow its disciplined fiscal plan, resulting in further debt ratio improvements."

The province's credit ratings have been improving over the last few years, with upgrades by all three major bond rating agencies in 2003 and 2004, and positive outlook reports in 2005.

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 refinance existing Nova Scotia debt.