British Columbia’s credit rating took a hit this week, with two major agencies lowering their assessments amid rising debt and mounting deficits. The province faces a daunting financial outlook, with borrowing costs set to climb and fiscal discipline under intense scrutiny.
Ratings Slashed as Debt and Deficit Balloon
On Wednesday, S&P Global Ratings downgraded British Columbia’s long-term issuer credit rating from AA-minus to A-plus. Moody’s followed suit, cutting its baseline credit assessment from AA1 to AA2. Both agencies cited the province’s growing debt burden and persistent deficits as the main reasons behind the moves.
The provincial government’s latest budget projects a record $10.9 billion deficit for 2025, with Moody’s warning that shortfall could swell to as much as $14.3 billion. Meanwhile, total debt will probably climb from $156.6 billion this year to over $209 billion by 2026-27. Interest payments on that mountain of debt could cost taxpayers seven cents of every dollar by then.
Government Response and Criticism
Premier David Eby acknowledged the financial challenges on Thursday, pointing to external pressures such as U.S. Tariffs as part of the problem. He emphasised the government’s commitment to protecting frontline services and investing in hospitals and schools while working to reduce administrative spending and outdated programmes.
"We need a path to return to balance," Eby said, highlighting ongoing reviews of provincial programmes to find savings without cutting essential services. But critics were quick to dismiss tariff impacts as an excuse.
Carson Binda, British Columbia director for the Canadian Taxpayers’ Federation, said rating agencies clearly blame the government’s governance and borrowing habits rather than external factors.
"They are blaming a weakening in governance from Victoria, massive levels of borrowing, and the lack of a plan to address these problems," Binda said.
Economic Headwinds and Fiscal Outlook
The province’s economic growth is forecast to remain below trend in 2026, buffeted by demographic shifts, housing market weakness, and ongoing trade uncertainties. According to TD Economics, real GDP growth will probably slow to 1.2% in 2026 before recovering to 1.8% the following year. Employment growth will be limited, with slight job losses projected before modest gains resume.
Trade tensions, particularly tariffs on lumber and base metals, continue to weigh on export activity. While British Columbia’s economy is less reliant on the U.S.
Than some other provinces, its trade performance hasn't outpaced more vulnerable regions. Capital expenditures are expected to rise only slightly in 2026, reflecting the winding down of major projects.
Population growth is also constrained by federal limits on non-permanent residents, affecting labour force expansion. The housing market remains subdued, with falling prices and sluggish sales persisting into 2025. A stronger housing recovery is unlikely until 2027, aided by better affordability and pent-up demand.
Historical Context and Political Fallout
British Columbia’s fiscal position has deteriorated sharply since Premier Eby took office in late 2022. His predecessor, John Horgan, left a relatively stable financial foundation, with the province returning to surplus after the pandemic-driven deficit of 2021-22. But Eby’s government quickly reversed course, running up deficits and increasing spending significantly.
One of the most controversial moves was a rapid $3 billion expenditure spree in spring 2023, which some argue squandered an opportunity to reduce the debt load. The province’s debt is now projected to more than double from $89.4 billion in 2022 to over $208 billion by 2027, with the debt-to-GDP ratio nearly doubling as well.
Opposition parties have seized on the credit downgrades to accuse the government of reckless spending and poor leadership. John Rustad, leader of the BC Conservatives, criticised the administration for failing to manage the province’s finances responsibly despite global economic challenges.
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With borrowing costs set to rise and fiscal pressures mounting, British Columbia faces a tough road ahead. How the government balances investments in public services with the need to rein in debt will shape the province’s economic future—and its creditworthiness—for years to come.
This article was created with AI assistance.
