Forecast For Ontario’s Budget Deficit Doubled To $15 Billion

The budget deficit in Ontario, Canada’s most populous province, will reach $15 billion this year, more than double previous estimates, says the province’s new finance minister.

Ontario Finance Minister Vic Fedeli has increased his forecast for the provincial deficit to $15 billion from $6.7 billion previously. Minister Fedeli said his upward revision is due to the fact that the previous Liberal government didn’t accurately portray Ontario’s fiscal situation.

The current Progressive Conservative government in Ontario came to power this past June, ending 15 years of Liberal rule in the province. Ontario, which is one of the world’s biggest sub-sovereign borrowers, has been under the glare of rating agencies with its debt set to soar in the coming years. Minister Fedeli has promised to balance the books, but hasn’t said when that will happen.

“Balancing the budget is not only a fiscal, but also a moral imperative,” Minister Fedeli said, adding that debt reduction would occur “in a reasonable, modest and pragmatic way.”

The new Conservative government has said that the previous Liberal government counted assets from two jointly sponsored pension plans as their own to balance the budget in previous years. Minister Fedeli didn’t specify how the bigger deficit will impact the province’s borrowing requirements, currently seen at $31.7 billion for the 2018-19 fiscal year.

Currently, Moody’s Investors Service rates Ontario at Aa2 with a negative outlook, while Standard & Poor’s has the province at A+ with a stable outlook. Fitch has Ontario at AA- with a negative outlook, while DBRS is at AA(low) with a stable perspective.

Ontario’s domestic bonds lost 1.5% this year, falling behind the provincial bond market which fell 1.4%, according to a Bloomberg index that tracks the performance of Canadian government and quasi-government issuers.