Upgrade in credit rating confirms government making wise financial decisions

The provincial government is very pleased to receive an upgraded credit rating from the Dominion Bond Rating Service (DBRS), which confirms government's efforts to improve the province's fiscal situation are starting to bring about positive results Premier Danny
Williams said today.

DBRS upgraded the short-term and long-term credit ratings of the province. The short-term debt is upgraded to R-1 (low) from R-2 (high) while long-term debt is now rated BBB(high) from BBB.

"The province's credit rating is one of the principal factors considered by potential lenders when deciding whether or not to invest in our securities. This upgraded rating means there is now less risk associated with provincial borrowings," explained the premier. "The upgrade to the highest short-term rating category also significantly expands the investor base for our short-term borrowing needs."

DBRS indicated that the rating upgrade is "primarily the result of the notable improvement recorded in the province's fiscal and financial situation in recent years." The agency noted several strengths influenced the rating consideration: a declining debt-to-GDP ratio; a strong commitment to fiscal discipline; the recent Atlantic Accord 2005 arrangement; and a positive economic outlook.

"Since taking office we have outlined a new approach of responsible fiscal management and strategic planning, and we are seeing the benefits of those actions," said Premier Williams. "We have also been very fortunate to benefit from a number of factors which contributed to a significantly improved fiscal situation. Through focused and demanding negotiations and hard work, we achieved considerable improvements to the equalization program, secured a new Health Accord, and of course, a new arrangement on the Atlantic Accord. These efforts are bringing significant dollars to our province, and we are managing them responsibly."

The rating was also influenced by several challenges still facing the province. DBRS noted that Newfoundland and Labrador has the highest debt level of all provinces, carries significant unfunded pension liabilities, and is facing a declining population.

"We know there is still work to be done on the financial front, and we remain focused on our plan to improve the province's fiscal situation. We have made considerable progress in a relatively short period of time, and it is encouraging that DBRS is recognizing our efforts," said Premier Williams. "We committed to long-term, meaningful change for Newfoundland and Labrador, and achieving fiscal stability is the first step to becoming self sustaining and prosperous long into the future. I am pleased we are clearly making substantive progress in this regard."

Media contact: Elizabeth Matthews, Office of the Premier, (709) 729-3960, 690-5500; elizabethmatthews@gov.nl.ca

2005 05 04                                        4:05 p.m.