Commentary
By Tegan Hill

On the heels of the Eby government’s disastrous budget, which includes a massive $13.3 billion projected budget deficit, this week the credit rating agency Moody’s downgraded the government’s credit score.

This is British Columbia’s fifth downgrade in recent years and may increase the cost of borrowing for the government. That’s bad news for B.C. taxpayers.

According to Moody’s, the downgrade reflects a “marked deterioration in the province's credit fundamentals. This deterioration is driven by continued growth in operating and capital spending, resulting in large structural deficits and rising leverage.”

The rating agency explained that the B.C. government has shifted from having one of the lowest debt burdens to one of the highest among provinces, and that the “latest budget confirms a deterioration in long-term fiscal management.”

This shouldn’t be surprising to British Columbians. The Eby government has ramped up spending to record levels, running large budget deficits and accumulating debt at an unprecedented pace.

In 2026/27, the Eby government will record the largest projected budget deficit on record at $13.3 billion with more deficits projected over the next two years.

After accounting for longer-term spending on capital projects (e.g. highways and schools), total provincial debt will reach a projected $234.6 billion in 2028/29, more than tripling since the NDP government first took office under John Horgan.

Of course, just like individual or household debt, British Columbians must pay interest on government debt. According to the Eby budget, debt interest payments will reach a projected $8.7 billion or $1,520 per British Columbian by 2028/29, up from $532 in 2016/17.

If debt interest was a department, it would be the fourth largest in the government. That’s money no longer available for health care, education or to make fiscal room for tax relief.

And that’s before this latest downgrade, which could prompt lenders to increase interest rates on the B.C. government, thus increasing the cost of borrowing money. In other words, the Eby government’s projected debt interest costs for this year and beyond may rise even higher than budget projections, creating a vicious cycle of larger deficits, rising debt interest costs, and so on.

The B.C. government’s latest credit downgrade is more bad news for British Columbians. On its current trajectory, the government will saddle British Columbians today and in the future with enormous levels of debt, which ultimately costs taxpayers.

Tegan Hill is Director, Alberta Policy at the Fraser Institute.