B.C's latest credit rating downgrade spells trouble says MLA

Credit rating trouble

The B.C. economy is in bad shape.

The recent downgrade of British Columbia’s credit rating proved what we have all known—the BC NDP government is spending more money than the economy is generating and our economy is sputtering to a crawl.

British Columbia’s credit rating was cut by S&P Global Ratings with a negative outlook—its third downgrade in three years—specifically because of the provincial government’s borrowing.

In February, the B.C. government projected a record deficit of nearly $8 billion for the 2024-25 fiscal year, and S&P noted the province’s fiscal performance is likely to “materially deteriorate in the next two years.”

With operating deficits equal to more than 5% of operating revenue, and after-capital deficits of about 20% of total revenue, “B.C.’s budgetary performance will be the weakest of its peers, both domestically and internationally,” it said.

Moody’s Investors Service also cut its outlook for the province to “negative” on Tuesday.

“The province’s willingness to allow material deficits to continue, along with rising debt levels, also points to weaker governance risk controls and financial management,” Moody’s said.

This is not just a numerical dip on a financial analyst's spreadsheet, it is a dire warning signal that spells real-world consequences for every taxpayer in the province.

Why does it matter? This latest credit rating reduction, a critical red flag, is poised to escalate borrowing costs, curtail funding to vital public programs, and burden B.C.’s economy.

The credit rating of a province is akin to a person's credit score—it influences the interest rates lenders charge on money borrowed. A downgrade indicates a higher risk associated with lending to the province, which naturally results in increased interest rates.

Each uptick in interest rates compounds the amount the government must pay, diverting funds that could otherwise support public services or reduce taxation. The result is a vicious cycle—higher costs mean higher debts, which in turn lead to further downgrades if not managed prudently.

For British Columbia, that means when the government borrows money for infrastructure, healthcare, education or other public services, it will face higher costs. Those elevated expenses are not absorbed by the government alone but are inevitably passed down to taxpayers, who will bear this financial burden through increased taxes or reduced services.

Moreover, the downgrade impacts the amount of money available for public sector projects, whether they are new hospitals, schools or roads, and could see delays or cuts. Funding that might have been allocated for improving public services or expanding new initiatives will now need to be redirected to cover the increased interest expenses. That scenario limits the government’s ability to respond to public needs and stifles the development of infrastructure that supports economic growth.

The financial repercussions of a credit downgrade extend beyond immediate fiscal pressures. It sends a chilling signal to investors and businesses considering British Columbia as a location for investment or expansion.

Economic growth is fuelled by confidence and a downgrade can erode this critical sentiment, leading to reduced investment and slower economic development. This erosion of investor confidence is particularly damaging at a time when B.C. should be capitalizing on its sectors of strength to foster recovery and growth.

For years, as the official Opposition, BC United has rung the alarm bell, cautioning against the provincial government’s rampant spending patterns. Regrettably, those warnings have not only been ignored but are now manifesting as fiscal obstacles that will challenge the province for years to come.

With the past three provincial budgets, we have consistently pointed out the perilous path of unchecked provincial spending. The warning was clear—without a strong commitment to fiscal responsibility, British Columbia risked a situation where it would not only face credit downgrades but also a potential fiscal crisis that could hinder its economic prospects for years.

The government’s failure to heed those warnings has placed an unnecessary strain on the fiscal health of the province.

The downgrade of British Columbia’s credit rating is a clear indictment of the government’s current fiscal policy direction. It is a wakeup call for a strategic reassessment of how the province manages its finances.

My question to you is this:

Are you concerned about the size of BC’s deficit? Why or why not?

I love hearing from you and read every email. Please email me at [email protected] or call the office at 250-712-3620.

Reneee Merrifield is the BC United MLA for Kelowna-Mission.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Renee Merrifield is the BC United MLA for Kelowna - Mission and Opposition caucus whip and critic for Environment and Climate Change, Technology and Innovation and Citizens’ Services. She currently serves on the Select Standing Committee on Education as well.

A long-time resident of Kelowna, Renee started, and continues to lead, many businesses from construction and development to technology. Renee is a compassionate individual who cares about others in the community, believes in giving back and helping those in need through service.

She values your feedback and conversation, and can be reached at [email protected] or 250.712.3620

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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