Nova Scotia’s credit rating downgraded amid deficit concerns

The Nova Scotia government’s credit rating was downgraded by S&P Global this week over concerns about the province’s mounting deficit, which Premier Tim Houston recently said could top $1.4 billion.

But the rating change still places the province in a category considered to have strong capacity to meet its financial commitments, while being “somewhat more susceptible” to changing conditions.

S&P lowered the province’s long-term issuer credit and senior unsecured debt ratings from AA- (its second-highest rating, or “very strong”) to A+ (its third-highest rating, or “strong”).

The province’s short-term issuer credit rating was downgraded to A-1 from A-1+, which still leaves it in the highest category, considered “extremely strong.”

The outlook for the province remains negative, according to S&P.

“The negative outlook reflects our expectation that, in the next two years, a higher spending base will result in operating deficits and elevated after-capital deficits persisting beyond our previous expectations,” the report says.

It points to a variety of challenges facing the province, including stalled population growth and the uncertainty of tariffs, along with major spending on projects and labour costs.

“Nova Scotia’s most recent forecast update has dealt a setback to its plan to return to balance by the end of fiscal 2029,” the report says.

The report cites higher-than-expected spending on health care services, support for seniors and long-term care as well as increased wages, and disaster relief assistance.

S&P says that increased spending, combined with high capital spending commitments, is expected to put pressure on the province’s borrowing needs and keep pushing up its debt burden.

The report goes on to list “potential bright spots” such as the recent suspension of Chinese tariffs on seafood. It also points to planned large investments in the natural resources and energy sectors and the potential of more federal spending on infrastructure and defence in the province.

Nova Scotia Finance Minister John Lohr was not available for an interview Friday.

In a statement, a department spokesperson said officials have been closely monitoring the province’s fiscal position.

“As government, it is our job to manage our finances responsibly while ensuring Nova Scotians receive the programs and services they need. This information is one of the factors we are considering as we prepare the 2026-27 budget.”

The statement from the province goes on to note that “there is still a strong demand for our bonds, particularly our short-term, 10-year bonds, so it hasn’t had a quantifiable impact on the cost of borrowing.”

NDP Leader Claudia Chender said the public gave the Progressive Conservatives the benefit of the doubt when they elected them in 2021 on a promise to fix health care that included an acknowledgement from Houston that it would take time and cost money.

“We were in a situation where we had seen under-investment in health care,” she said in an interview.

“We needed infrastructure spending and we needed workforce renewal.

“But the reality is that health-care spending hasn’t delivered the results that people were looking for.”

Interim Liberal Leader Iain Rankin said the report from S&P is an acknowledgement that the government is “a little riskier than it was before.”

He called on the PCs to start doing a better job managing their budget and stop with the overspending that has become an annual exercise.

“This kind of mismanagement discourages private investment and makes Nova Scotia less competitive compared to other provinces.”

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