Opposition party says Quebec rating agencies worry it will cost more to borrow

A copy of the provincial budget is shown in the hands of Quebec Premier Francois Legault Tuesday, March 12, 2024, at the premier’s office in Quebec City. THE CANADIAN PRESS/Jacques Boissinot

The Quebec Liberal Party (PLQ) fears a borrowing cost increase, following the "alarm signal" sent out by rating agencies the day after the Quebec budget was tabled.

The budget announced a shortfall of $11 billion for 2024-2025. That's almost four times more than forecast, a record in absolute figures.

On Thursday, PLQ finance critic Frédéric Beauchemin brandished Moody's and DBRS Morningstar warnings, pointing out that Quebec still has no plan to return to a balanced budget.

Finance Minister Eric Girard said on Tuesday that he would present one in 2025.

Moody's and DBRS issued warnings about Quebec's public finances. "Record deficit, no plan to return to a balanced budget... the alarm bells have gone off (...) It's going to cost more to borrow," said Beauchemin.

DBRS said that "the financial outlook (for Quebec) has clearly deteriorated."

"In the medium term, this gloomy outlook could affect the evolution of credit ratings," according to the firm, which nonetheless acknowledges that Quebec has a "sound" management history, "which should lend stability to its credit profile."

According to the Moody's report, "the decline in budgetary results is a credit negative that highlights the pressures the Quebec government is facing in both revenues and spending."

When asked on Thursday about the subject, Girard played down the rating agencies' statement: "They always issue press releases after a budget, that's their normal practice," he said, visibly annoyed.

"They do not say that they are negative on Quebec's credit rating (...) There has been no indication that the rating has changed," he added, explaining that there is a process to follow with the agencies and that Quebec is still a long way from a downgrade.

For Premier François Legault, the deficit, equivalent to 1.5 per cent of the province's GDP, is "reasonable" and not as bad as some past deficits, according to the comparison table he posted on social media.

PLQ interim leader Marc Tanguay pointed out in the national assembly that the table in question contained a factual error, which was subsequently corrected by the premier.

CAQ MNA Youri Chassin is an economist who worked at the Montreal Economic Institute -- a right-wing think-tank. He described the $11 billion deficit as "staggering" and "very serious" during a speech in the Salon bleu.

"I think we have to warn ourselves against minimizing $11 billion. (...) We all understand that an $11 billion deficit is very serious," he said.

Parliamentary budget officer

At the end of a difficult week for the Coalition Avenir Quebec (CAQ), the Liberals also attacked the "credibility" of the Finance Minister, who "got it wrong" on several occasions, notably "in his budget forecasts."

To prevent this from happening again, on Thursday, PLQ house leader Monsef Derraji tabled a bill to create the position of parliamentary budget officer (PBO) in Quebec.

An independent PBO, like those at federal level and in Ontario, would assist MNAs in analyzing the state of finances, the government's budget forecasts and trends in the economy.

• Here are the highlights of the Quebec budget

"Quebecers have lost confidence in the CAQ, which is squandering their money irresponsibly and without any transparency," said Derraji. "A PBO has become essential to ensure transparent, enlightened and completely objective governance."

All the opposition parties have come out in favour of the creation of a PBO position over the past year.

This report by The Canadian Press was first published in French on March 14, 2024.