Alberta's growing debt behind credit rating downgrade, Moody's says

The latest hit to Alberta's credit rating is just the cost of keeping Albertans employed, says Finance MinisterJoe Ceci.

On Monday,Moody's Investors Service downgraded the province's long-term debt ratings From triple-A to double-A1,blaming "deep deficits and long return to balanced budgets forecasted by the province, and the resulting rapid and substantial rise of provincial debt levels."

Ceci says the province choseto go into debt, spending billions on infrastructurewhile resisting cuts to public services.

"The bottom line is that we had a choice," he said in a news release Monday. "We could have raised taxes, fired teachers and nurses, and made reckless cuts to social services."

In its recent budget, the province's NDP governmentremoved adebt ceiling andforecast a$58-billiondebt by 2019.

But Moody'sclaims Alberta's plan for recovery is marred by overly-optimistic oil-price forecasts, which have a huge impact on government revenues.

"The province has forecasted that WTI crude oil prices will rise from$42 US/barrel to $64 US/barrelover the next three years," Moody's states in a release."These prices remain above Moody's oil price forecasts for the medium-term of$33 US/barrel for 2016 rising to$43 US /barrelby 2018."

Moody's warns that given the lengthy period of budget deficits forecasted, and the potential for weaker economic activity and continued revenue dependence on volatile oil royalties, the province's fiscal health could deteriorate further.

Not first credit downgrade

This is not the first timeAlberta's rating has been downgraded recently.

Credit rating agency DBRSdowngraded Alberta's credit rating a notch to double-Aa day after the province released itsdeficit-laden budget April 14.

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DBRS saidthe NDP government's reluctance to rein in spending or increase taxation would push debt levels higher than a triple-A rating could justify.

In December, Standard and Poor's reducedAlberta's rating one notch from AAA to AA+.

At the time, Ceci said he didn'texpect the change to affect borrowing costs because he believedAlberta's investors have already recognized the impact of low oil prices on provincial finances.

The latest credit downgrade came asCeciheaded to meet with investors and credit rating agencies in Toronto and New York.

During the four-daytrip which started Monday,Ceciwill deliver speeches tothe Canadian Association of New York and the Economic Club of Canada.

"We want the financial community to understand the global price shock Alberta faces, along with the prudent path we've taken to address this challenge, and the fact our province remains a great place to invest and do business," saidCeciin a news release..