British Columbia’s credit rating was cut to AA- by S&P Global Ratings with a negative outlook — its third downgrade in three years — after the provincial government decided to ramp up borrowing.

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The firm said it may lower its rating again in the next two years if the province, Canada’s third-largest by population, “maintains its current fiscal trajectory.”

In February, the B.C. government projected a record deficit of nearly $8 billion for the 2024-25 fiscal year as it unveiled plans to accelerate spending on infrastructure, health care and education ahead of a provincial election that’s currently scheduled for Oct. 19.

B.C.’s fiscal performance is likely to “materially deteriorate in the next two years,” S&P said in a note Monday. With operating deficits equal to more than five per cent of operating revenue, and after-capital deficits of about 20 per cent of total revenue, “B.C.’s budgetary performance will be the weakest of its peers, both domestically and internationally.”

Moody’s Investors Service has rated B.C. at its highest rung, Aaa, since 2006 partly on the basis that provinces in Canada have support from the federal government. However, it 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.

Fitch Ratings has had B.C. at AA+ since 2021, according to data compiled by Bloomberg.

“We continue to be a leader among provinces when you look at credit ratings from all four credit rating agencies,” Finance Minister Katrine Conroy said in an emailed statement. “B.C. is an economic leader in Canada and a leader in growing jobs and wages, with unemployment among the lowest in the country. Our debt-to-GDP ratio is one of the lowest among provinces and our interest bite is the lowest.”

The opposition B.C. United Party, which changed its name from the B.C. Liberal Party last year, blamed the downgrade on “reckless spending” by the New Democratic Party-led government of Premier David Eby.

B.C. was rated AAA by S&P until July 2021. Its new ranking is still the fourth-highest available from S&P and compares favourably with other large Canadian provinces: The agency also rates Quebec and Alberta at AA-, while rating Ontario and Manitoba A+. Saskatchewan is rated AA.

Bloomberg.com