Frequently Asked Questions

How much debt does the Province of British Columbia have?
As of June 30, 2008, the province, including Crown corporations and agencies, had estimated a total net debt outstanding of $35.5 billion, of which $1.7 billion is short term. Total net debt now includes debt for schools, universities, colleges and institutes, and health care organizations (SUCH sector).

Which markets have you borrowed in during fiscal year 2008/2009?
For the period of April 1, 2008 to June 30, 2008, the province borrowed $1,600.1 million in the Canadian market.

How much have the province, crown corporations and agencies borrowed to date this fiscal year?
Total long-term borrowing to March 31, 2008 was $1,600.1 million.

Is the province's 2008/2009 borrowing concentrated in longer or shorter dated terms?
For the period of April 1, 2008 to June 30, 2008, 19.8% was borrowed in the 4-7 year term, 13.2 % in the 8-12 year term and 67.0% in the 13-41 year term.

How much is the province planning to borrow in fiscal 2008/2009?
Forecasted gross borrowing requirements for fiscal 2008/09 are 5.2 billion including a $750 million forecast allowance. For more details on Budget 2008, visit www.gov.bc.ca/fin.

Does the province have any foreign exchange exposure? If yes, which currencies and how much?
Yes, the Province of British Columbia has limited exposure to Japanese Yen. As of June 30, 2008, the province (excluding Crown corporations and agencies), had estimated exposure as a percentage of net debt of 1.8% to the Japanese Yen.

How much of the province's debt is floating?
As of June 30, 2008, the province's net debt (excluding Crown corporations and agencies) is estimated to be 18.8% floating.
Note: the province defines floating debt as including all maturities within the next year, short-term debt outstanding and fixed issue debt that has been converted into floating instruments.

What is the difference between Debt and Deficit?

Debt – represents the money borrowed from lenders for a variety of reasons, and using a variety of debt instruments including short-term notes, capital leases and bonds.

The province pays interest for the use of the money it borrows and is obligated to repay it at a set date as determined by the terms of the debt instrument. For bonds, the province contracts to pay the bondholder a stipulated rate of interest on specific dates over a stated period of time. At the end of this time the province agrees to repay the principal amount against the surrender of the bond. For other debt instruments, the interest is a component of the payment that is due when the instrument matures.

Deficit – an excess of expense over revenue.

1. the annual deficit is the amount by which the total annual operating expenses for the year exceed total annual revenues.
2. the accumulated deficit is the sum of all deficits and surpluses incurred since the inception of the provincial government, and also represents the amount by which the total liabilities of the province exceed its total assets.
3. deficit spending is the spending of public funds raised by borrowing rather than by taxation.

Is the Debt increasing or decreasing?
To meet the needs of a growing economy, significant capital investments are planned over the coming years. As a result provincial debt is forecast to increase to $40.0 billion by March 31, 2010.

Where does all this money come from?
The province’s borrowing requirements are expected to come from the domestic capital market, with a smaller portion of funds sourced from international markets.

Who decides where our money is spent?
General policy guidance on the priorities of government are set by the Executive Council or Cabinet. Translating these priorities into services that are delivered to the public is done by three general groups within the government reporting entity: ministries, taxpayer-supported service delivery agencies, and the SUCH sector (schools, universities, colleges and health authorities). The proposed public spending by these organizations is set out in the government's Budget and Fiscal Plan each February.

As part of the budget process, cabinet ministers submit annual Estimates of their ministry's spending to the Legislative Assembly for inclusion in the annual appropriation bill known as the Supply Act. Ministries are responsible for both providing services directly to the public and funding to other organizations such as the taxpayer-supported service delivery agencies and the SUCH sector in support of their activities. Each ministry's financial appropriation is subject to debate and vote by the Assembly.

The expectations of government with respect to the services to be delivered by taxpayer-supported service delivery agencies are set out in letters of expectation between the boards of the individual agencies and their respective responsible ministers. The boards then direct the management of the agencies in the delivery of the expected services.

The SUCH sector entities primarily are governed by legislation. As well, the individual ministers responsible for the programs that the SUCH entities deliver provide instruction to the boards on specific policy issues. The boards, in turn, provide direction to their management teams on the delivery of service to the public.

The government’s financial year runs from April 1 to March 31 of each year.

Why does the province borrow money?
The province borrows money because current revenue from taxes is not sufficient to meet all expenditures. Large sums of money are required for capital expenditures on schools, hospitals, roads, power plants and so on. The province borrows money for capital projects and then collects taxes in subsequent years to pay the principal and interest. These assets are expected to last a long time and benefit present and future residents. Therefore, the cost is spread out over the life of the assets and shared by all those who will benefit from them during that time.

The province and its Crown corporations and agencies also borrow money to finance operations. Tax revenue is collected at different levels throughout the year (for example, property taxes are collected in July). As a consequence, cash is borrowed for short periods to pay for unforeseen operating expenses (for example, additional money is required during the forest fire season).

From whom do we borrow money?
The province raises funds from various international capital market sources depending on market conditions and the ability to secure the lowest cost of funds. By diversifying its borrowing sources away from the traditional domestic market, British Columbia is able to tap international demand for its debt securities. Typical investors include pension funds and insurance companies.

Do we loan money?
We do not loan money in the traditional sense, rather the provincial government and its Crown corporations and agencies incur debt to finance operations and capital projects.

Who rates B.C.’s credit and how?
Three credit rating agencies rate the province, two major U.S. rating agencies (Moody’s and Standard & Poor’s) and one national firm (Dominion Bond Rating Service). Each agency conducts a detailed annual review following the provincial Budget presentation and each agency monitors the province throughout the year. Recently, Fitch Ratings also released a rating on the Province.

British Columbia has one of the highest credit ratings among the Canadian provinces, reflecting its strong balance sheet and the depth and diversity of its economy. Moody’s and S & P recently upgraded the Province’s credit rating to their highest possible rating, which moves it to first place (tied with Alberta). The Province is second behind Alberta with DBRS.

B.C.’s ratings are: Moody’s "Aaa", S&P "AAA", DBRS "AA (High)", and Fitch "AAA".

How does our credit rating affect our cost of borrowing?
A credit rating is an evaluation of a borrower’s ability to pay interest and to repay principal. A credit rating affects the borrower’s debt servicing costs and the investor’s rate of return since the investor will demand a higher interest rate on a more risky, lower-rated security.