June 9, 2006
For immediate release
Moody’s Upgrades Province of Prince Edward Island
“I am very pleased with this latest upgrade because it indicates that we are moving in the right fiscal and economic direction. It serves as an important signal to Canadian and international businesses and investors that P.E.I. has its fiscal house in order and is open for business,” said Provincial Treasurer Mitch Murphy.
The Provincial Treasurer continued to say that as a result of this rating upgrade, provincial borrowing costs will decline.
According to Moody’s, “The upgrade reflects a more disciplined fiscal framework that is now generating only minor deficits, leading to modest improvements in debt ratios, and an improved environment for federal-provincial fiscal transfers.” In the credit rating decision, Moody’s refers to the disciplined approach to budgeting, which began in 2004/05 and includes such measures as a government-wide program review and workforce renewal initiative, and is now well-entrenched and generating much improved outcomes.
The rating agency takes into account a number of fiscal and economic factors in making its decisions. Some of the key factors taken into account by Moody’s in its upgrade include:
- A reduced debt-to-GDP ratio of 31.4% as of March 31, 2006.
This ratio compares favourably to those recorded only two years previously when debt-to-GDP was 33.9%.
- A decline in the debt-to-revenue ratio to 116.0% for the year ending March 31, 2006. The previous debt-to-revenue ratio was 127.5%.
- For 2006/07, the budget projects a consolidated deficit of $12.5 million following a deficit of $18 million in 2005/06. These minor deficits contrast with that generated in 2003/04 of $125.1 million and illustrate the results of the renewed fiscal discipline.