Province updates debt management approach

CANADA, February 27 - The Government of Prince Edward Island is providing updated context for its approach to provincial debt and outlining a new advisory committee to be established.

“Part of our forward-thinking strategy has been to invest in building the hospitals, schools and roads that the Islanders of today and tomorrow need, the things that will keep our economy growing. By strengthening our fiscal anchors and expanding our debt repayment tools, we are improving accountability, supporting our province’s long-term sustainability, and mitigating risk. I also believe that creating a new risk committee speaks to this government’s commitment to improving transparency and will give Islanders the sense of security that comes with having an educated and experienced group of experts, including our in-house specialized staff, working on such an important initiative.”

— Jill Burridge, Minister of Finance and Affordability

The core fiscal anchors supporting the approach include targeting a net-debt-to-GDP ratio of less than 40 per cent and an interest-to-revenue rate of less than 7.5 per cent. These indicators measure the amount of debt relative to the provincial economic output and how much of the province's revenue is diverted to pay for the debt, and are two metrics that will help government respond to changes in global economies, access capital markets, and manage debt costs and long-term sustainability.

The establishment of a general sinking fund in addition to a bond-specific sinking fund will ensure that money is available to pay debts as they come due and helps manage the debt servicing costs by avoiding a reliance on more expensive short-term borrowing. An accompanying policy shift includes committing a minimum two-million-dollar annual contribution, at least 50 per cent of future operational surpluses, 25 per cent of net income interest from the liquidity reserve and short-term borrowing program, and/or a portion of unexpected windfalls at Treasury Board’s discretion to fund debt repayment measures.  

Government is also establishing a risk committee, to be comprised of both senior civil servants and non-government affiliated finance professionals, which will advise on liability management, policies, and activities. More details about committee recruitment and appointment will be announced in coming weeks.

More information on the debt management approach can be found online.

Media contact:
Janice Fogarty
Department of Finance and Affordability
jefogarty@gov.pe.ca