Budget Considerations – Borrowing

Introduction

The Provincial Government has three methods to deal with the current budget shortfall: increase revenues through raising taxes and user fees; decrease expenditures; and borrowing. In determining a reasonable amount to borrow, one must consider the impact borrowing will have on the Provincial Government’s ability to service its debt.

Gross Debt

Gross Debt is total borrowing minus money that is set aside to pay off the debt. Gross Debt has decreased from $6.8 billion in 2004 to $5.1 billion in 2014 (24.6 per cent). There has been a continuous decline in Gross Debt since 2008. This allows us the capacity to borrow to assist with our adjustment to new circumstances.

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Debt Expense

Debt Expense as a Percentage of Net Revenues measures the extent to which interest costs may impact the Provincial Government’s ability to provide for the economic and social needs of its citizens. In 2004, 25 cents of every dollar the Provincial Government took in as revenue was used to pay the interest on our debt. Today, that is down to 11 cents on every dollar we take in as revenue. In as much as this has been a huge improvement, interest costs remain a significant expense incurred by the province.

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