Budget Bulletin: Debt Management

BALANCING THE BUDGET

To get your finances in order, the first step is to balance your budget. That's what the province has done the past number of years.

This is the sixth consecutive year that the province has brought forth a balanced budget.

Eliminating annual budget deficits, however, is only one part of managing debt, the other is to stop the debt from growing. That's what the debt reduction plan is designed to do.

DEBT REDUCTION PLAN

In recent years, the province of Nova Scotia has taken a number of steps to stop the growth of Nova Scotia's debt. One of the most important steps has been its Debt Reduction Plan, introduced in April 2005.

The plan has two components, a legislated requirement to ensure the $830 million Nova Scotia received from the Offshore Offset Agreement is applied to the debt, and a commitment to have the net direct debt decline, beginning in 2007-08.

Applying the full $830 million from offshore offset directly to the province's gross debt helped reduce annual net debt-servicing costs from $890 million in 2004-05 to $841 million in 2007-08. These savings were redirected to help fund programs and services Nova Scotians use every day.

Since implementation of the Debt Reduction Plan, net debt-servicing costs, as a percentage of the province's total expenditure, have gone from 14.7 per cent in 2004-05 to 12.1 per cent in 2006–07. Nova Scotia is on track with its Debt Reduction Plan.

In addition, while the net direct debt was not slated to decline until 2007-08, it was reduced in 2004-05 by $22.6 million and in 2005-06 by $66 million, because of increased surpluses, largely because of higher than anticipated revenues.

As planned, in 2006-07, Nova Scotia's net direct debt did increase. This was primarily because of funding a number of important capital projects that provided much needed infrastructure across the province.

In 2007-08, the province's net direct debt will decline by $15.4 million, which will put the net direct debt at an estimated $12.414 billion. This is $7 million lower than estimated in the Debt Reduction Plan of 2005.

The government has reaffirmed its commitment to stop the debt from growing, and will continue to focus on living within our means and spending responsibly.

Note: For further 2007-08 budget information, see the Department of Finance website at www.gov.ns.ca/finance.