--Foreign and local currency long-term IDR at 'AA';
--Short-term IDR at 'F1+';
--Senior unsecured long-term debt at 'AA'.
The Rating Outlook on the long-term ratings is Stable.
Senior, unsecured obligations of the Province of
KEY RATING DRIVERS
MANAGEABLE DEBT DESPITE CYCLICAL REVENUES: The rating is based on the province's sound fiscal management. The province has generally balanced operations and a sizable reserve cushion on a core operations basis enabling it to reduce and maintain a lower burden of debt for governmental general purposes. The province has demonstrated a commitment to maintaining fiscal balance despite exposure to cyclical economic and revenue trends.
STRONG MANAGEMENT OF RESOURCES: Provincial revenues are diverse, although the sizable natural resource-related component is volatile and vulnerable to global resource trends.
CONSERVATIVE FISCAL MANAGEMENT: Fiscal management is prudent, with reasonable forecast economic projections and balanced operations projected for fiscal 2015 and through the forecast period. The province continues to maintain a large fiscal cushion in the growth and financial security fund (GFSF), a key factor in supporting the rating.
VULNERABILITY TO RESOURCE ECONOMY: Economic growth was initially very strong following the recession and continues despite some recent potash-related volatility. The province remains vulnerable to global commodity trends. Population growth and economic diversification continue to expand the province's economic profile.
CONTINUED RESERVE GROWTH: Additional growth in reserves in the context of ongoing careful fiscal and debt management would further offset resource-related volatility and could lead to a rating upgrade.
SEVERE VOLATILITY AND RESERVE DEPLETION: Unexpectedly severe economic and revenue volatility beyond the cushion provided by existing balances could lead to a rating downgrade.
The province's 'AA' long-term rating is based on its demonstrated commitment to maintaining fiscal equilibrium despite the cyclicality inherent in its economy and revenue profile. Past action to direct resource revenue-related surpluses to reduce debt and build reserve balance has yielded ongoing fiscal benefits. As such, the province has an affordable burden of liabilities and maintains a sizable fiscal reserve in the form of the GFSF, a reserve established in 2009 to cushion against fiscal shocks and provide resources for economic development. Economic growth and diversification continues, albeit more slowly than in recent years.
ECONOMIC GROWTH CONTINUES
The province's economy has grown rapidly over the last decade, in spite of commodity-related volatility arising from its globally important agriculture and mining sectors. Although employment growth slowed with the recession in 2010 and 2011, gains thereafter were significantly ahead of
Employment rose 2.1% and 3.4% in 2012 and 2013, respectively, compared to 1.2% and 1.3% for
Economic gains have brought steady population growth to the province in recent years, with 2013 population topping 1.1 million (up from 996,000 in 1996). The province expects population to reach 1.2 million by 2020.
Real GDP rose 4.1% in 2013, with the province benefiting from a historically strong grain harvest. Although inherently volatile, the economic trends affecting each of the province's commodity sectors are not necessarily synchronized, with disparate economic and fiscal impacts on the province. For example, the benefits of 2013's strong agricultural harvest were partly offset by uncertainty and price declines in the potash sector, which were the result of market factors far beyond
The economic forecast underlying the FY 2015 budget, tabled in
PROVINCE MAINTAINING FISCAL BALANCE
The province has a disciplined approach to financial management. The province has generally balanced annual operations and a history of setting aside resource-related revenue windfalls to cushion volatility, for capital needs, and to reduce debt. This has enabled it to lower debt ratios materially following the 2008-2009 resource boom. As such, the province has virtually eliminated the accumulated deficit of core operations (formerly the general revenue fund, or GRF) and building a substantial accumulated surplus from a wider summary financial statements (SFS) perspective.
The FY 2015 budget, tabled in March, estimates that FY 2014 ended in balance on a core operations basis, although not without a small draw from the GFSF. Own-source revenues were 1.4% below the FY 2014 budget plan, the result primarily of a sizable variance in potash receipts. The variance offset the small,
The FY 2015 core operations budget is restrained, with own-source revenue growth of 3.3%, while spending rises only 1.2%. The plan foresees a net operations surplus of
In a change from past practice, the FY 2015 tabled budget shifts emphasis to the SFS perspective, to better align the budgetary presentation to auditor recommendations. The FY 2015 SFS budget is forecast to be in balance, with revenues of
DEBT LIABILITIES MANAGEABLE
The debt obligations of the province have become more manageable over time as past actions to lower outstanding debt and the government's emphasis on budgetary balance have reduced the need for borrowing. Public debt on an SFS basis, including government general and business enterprise debt and nets out sinking fund equity, has risen over time. This is driven by Crown corporation component, even as the balance of government general debt fell from
Public debt as a share of GDP, as high as 20% of GDP in FY 2008, is forecast at 14.2% in FY 2015. Debt service for government and crown corporation debt totals a manageable 3.9% of SFS expenses, down from 8.3% as of FY 2008.
Net liabilities to retirees for several closed defined benefit plans are substantial, at
Additional information is available at 'www.fitchratings.com'.
--'Tax-Supported Rating Criteria' (
--'International Local and Regional Governments Rating Criteria, Outside
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria - Outside
Source: Fitch Ratings
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