TORONTO – Ontario’s Aa2 issuer and long-term debt ratings have been upgraded to stable from negative.
Moody’s Investors Service says the revised outlook reflects its prediction that Ontario’s debt burden will continue to modestly improve as the province moves towards balanced budgets and reduces its annual financing requirements.
The agency had downgraded Ontario’s debt rating in July 2014 to negative from stable, expressing skepticism that the province could eliminate the deficit by 2017-18.
It now says that with the return to balanced budgets on the horizon, the debt burden is expected to show slight improvements over the medium term, helped by continued expenditure control and increasing revenues.
Moody’s also says that despite Ontario’s “ambitious infrastructure spending program,” the province’s debt accumulation should be such that the debt relative to revenues improves over the medium-term.
It says that though the province only expects thin surpluses in the years after the budget returns to balance, it has plans in place to ensure it meets its fiscal targets.
“The stable outlook on the province of Ontario’s ratings reflects our opinion that the province has presented a budget plan with little risk that the debt burden will exceed recent levels,” said Michael Yake, Moody’s vice president and lead analyst for Ontario.
“While we remain highly attentive to the province’s elevated debt burden, our current forecasts are for it to fall marginally across the medium-term and, as importantly, for interest expense to remain manageable as well.”
Ontario’s Finance Minister Charles Sousa says the upgrade reflects Moody’s “confidence in our government’s plan to grow Ontario’s economy and create jobs for Ontarians.”