Almost three weeks ago, I quoted Professor Jack Mintz who said “Creditors eventually will want Canadian governments to have sustainable fiscal plans. If not, they will downgrade our debt, leading to higher interest rates. This has already happened to Alberta, which has the lowest debt-to-GDP ratio of all the provinces but also the second highest credit spread over Canada 10-year bonds. The most serious problems arise in countries that lose capital inflows, have falling currencies and can’t repay their international loans. That was Argentina this past week.“
Today, Bill Curry reports in the Globe and Mail, that “Fitch Ratings has downgraded Canada’s triple-A credit rating to AA+ in light of “much expanded” 2020 deficits due to billions in emergency spending during the novel coronavirus pandemic … [and] … The downgrade of Canada’s long-term foreign currency issuer default rating is the first change since Fitch assigned Canada a AAA rating in that category in August, 2004.” Canada’s AAA rating reflected the hard work of federal leaders Brian Mulroney (ably aided by finance ministers like Michael Wilson and Don Mazenkowski) and Jean Chrétien (and Paul Martin) and of provincial governments headed by the likes of Ralph Klein and Mike Harris, all of whom contributed to cleaning up the fiscal mess that Pierre Trudeau left. Justin Trudeau and Bill Morneau now seem intent on destroying decades of sound fiscal management as they search for popularity in the global media.