NL Finance Minister Gets Downgrade (PART 2)

Last time, I discussed the Dominion Bond Rating Service (DBRS) Report which confirmed the “A” credit rating of the Province. The Minister of Finance, in making that announcement, noted a comment by DBRS that, he said, was proof of why the Government should proceed with Muskrat Falls.

Uncle Gnarley obtained a copy of the full DBRS Report and caught Tom Marshall being selective; too selective for a Finance Minister.  Transparency is an important watchword; people have a right to know what their government is up to and how important agencies, like DBRS, feel about the fiscal management of our economy, especially the budgetary process, over which the government has substantial control. 

When government decisions go awry or they engage in bad management practices, the public should not be shielded from the result by 'bafflegab'.  It is part of the reason we are rightfully upset about the recent amendment to Bill 29, the Act governing public access to information. 

This week, let’s look at what DBRS had to say about the NL Budget, our current fiscal position and how the Muskrat Falls project will play a key role in economic forecasts.

The Province gets an “A”. Finance Minister gets a “C” (Part 1)

The Dominion Bond Rating Service (DBRS) released its economic outlook for the Province of Newfoundland and Labrador on August 10, 2012.  A few days later, on August 13^th, the Finance Minister released a Statement informing us that DBRS had confirmed the Province’s ‘‘A’’ credit rating.    

The DBRS Report had placed the Minister in a jovial mood.  Likely, he was not surprised about our credit rating being maintained.  What had made him so pleased?  The Report contained a few nuggets about Muskrat Falls he wanted to share.

DBRS is an important and objective international financial house engaged in the business of rating the bonds of governments and corporations. 

Banks and their clients use this information to assess creditworthiness; investors parse every phrase used by such firms; their words cause interest rates to rise and fall.  For governments and for large corporations, a change of credit status may represent millions of dollars of cost, or of savings.      

It is important to note that any downgrade is seldom made in the absence of prior expressions of guidance, subtle hints or outright warnings.

Institutions like DBRS are, therefore, important.  No one knows that better than a Minister of Finance.