Double blow as S&P and Moody’s downgrade B.C.’s credit rating again, citing deficit

Minister of Finance Brenda Bailey tables her first budget in the legislative assembly at legislature in Victoria, B.C., on Tuesday, March 4, 2025. THE CANADIAN PRESS/Chad Hipolito

Credit rating agencies S&P and Moody’s have both downgraded British Columbia’s rating on the same day, citing the province’s ballooning deficit and the apparent lack of a plan to dig the province out of its fiscal hole.

S&P Global Ratings cut the province’s long-term issuer credit rating to A+ from AA- on Wednesday, while Moody’s Ratings downgraded its key baseline assessment to aa2 from aa1.

Moody’s said in a news release that its downgrade reflected a “structural deterioration in British Columbia’s credit profile” and it predicted this year’s deficit would soar to $14.3 billion.

That’s more than 31 per cent higher than the forecast in Finance Minister Brenda Bailey’s budget last month, and 57 per cent higher than the most recent estimate of last year’s deficit.

Moody’s said its credit outlook for B.C. remained negative with no “clear visibility” on how the province would balance its finances.

“The uncertain trade environment with potential further negative implications on the provincial economy and fiscal position adds further risks to British Columbia’s credit profile,” Moody’s said.

A lower credit rating can make it harder for a government to secure loans and attract investment, and can force it to offer higher rates on its bonds.

S&P said there was a “fiscal mismatch” in the government’s operations, blaming its fourth downgrade in four years on “considerable” deficits and rapid debt accumulation continuing through to the 2028 fiscal year. 

It also cited the apparent lack of a strategy to scale down the deficit.

“A lack of a credible medium-term plan outlining how the province will tackle its structural budgetary shortfall could cause us to weaken our financial management assessment, potentially leading to a lower issuer credit rating,” it said.

S&P said it retained a negative outlook for B.C.’s finances, reflecting a one-in-three chance of a further downgrade in the next two years if the province’s “commitment to fiscal consolidation continues to waver.”

Bailey told reporters in the legislature that the government had known there was a “strong likelihood” of the downgrades given the “complex circumstance” posed by the Canada-U. S. trade war.

She said Moody’s noted that B.C.’s economy “remains strong and resilient and diversified.”

But the agency squarely blamed the deterioration of the deficit on Premier David Eby’s NDP government.

“The increase in deficits and rising debt largely stems from provincial policy choices, which we view as evidence of a continued weakening in governance and fiscal and debt management, from high standings,” Moody’s said.

“We view this as a notable departure from the province’s historical approach of budgeting that focused on limiting the growth in debt or protecting its fiscal position.”

Asked about both ratings agencies’ complaint about the apparent lack of a plan to balance B.C.’s books, Bailey said the budget “has us getting started” on that target. 

“We’re approaching this work with the very specific goal of protecting core services for British Columbians,” she said.

Opposition Leader John Rustad of the B.C. Conservatives said the downgrades were “a direct consequence of reckless spending and economic mismanagement by David Eby.”

“British Columbians are paying more and getting less. Now, we’re paying the price with a weaker credit rating, which means higher borrowing costs for our province,” he said in a statement.

Bailey’s budget had forecast a record deficit of $10.9 billion this fiscal year, while the end of B.C.’s consumer carbon tax on Tuesday is poised see the deficit continue to grow, something noted by Moody’s.

S&P also cut B.C.’s short-term rating to A-1 from A-1+, while Moody’s downgraded its long-term issuer and senior unsecured debt ratings to Aa1 from Aaa.

This report by The Canadian Press was first published April 2, 2025.