Auditor general warns of 'disturbing' debt situation

Auditor General Kim MacPherson issued a scathing critique of New Brunswick’s financial situation in her latest report into the province’s finances.

The auditor general said the New Brunswick government must make "significant changes" to improve the province’s fiscal health.

"Three consecutive years of deficits with a fourth one projected for 2011-12. This trend is very concerning," MacPherson’s report said.

The province’s net debt has grown from $7 billion in 2004 to $9.4 billion in 2011.

"This significant increase in net debt represents a very disturbing trend," her report said.

MacPherson said in an interview that the province's worsening financial situation could lead to future problems for the provincial government.

"There will be a point where the province will not be able to meet their financial commitments, to put on programs like education and health to the same way that we enjoy them today," she said.

"We will not be able to meet our creditor requirements, pay the interest on the debt, if we don't address the problem."

Premier David Alward and Finance Minister Blaine Higgs have warned about the province's financial situation.

The provincial deficit is estimated to hit $547.5 million in 2011-12, almost $100 million higher than Higgs forecasted in March.

Debt problems

The province’s chief financial watchdog said the province’s net debt situation is worsening faster than other comparable provinces.

For instance, Saskatchewan's debt is $3.7 billion and Nova Scotia's debt is $12.8 billion.

When the 2009 fiscal year ended, New Brunswick's debt was 60 per cent of Nova Scotia's debt. By March 31, 2011, New Brunswick's debt was 73.9 per cent by March 31, 2011.

The auditor general said New Brunswick had the highest percentage debt increase of its comparable provinces.

The province's net debt-to-gross domestic product radio has also increased steadily in recent years. In 2007, the province's debt-to-GDP ratio was 25.8 per cent but it has now increased to 33.2 per cent.

"This means the net debt of the province is increasing faster than the growth in the economy thus becoming more of a burden on the economy," the report said.

The report also lists a chart of 12 different indicators of fiscal sustainability. The report gives the New Brunswick government one favourable rating, four neutral and 12 unfavourable.

"This illustrates the immediate need for the province to develop a viable plan to improve the financial health of the province," the report said.