The same is true of government. Debt can play a positive role in financing the infrastructure necessary for continued economic growth. But consistent borrowing to finance government deficits can lead to the accumulation of debt, with more tax dollars going to banks to pay interest, and less to provide services for people.
Public awareness of federal and provincial debt levels has increased significantly over the last several years. Canadians are concerned about escalating debt at both the federal and provincial levels, and are looking to their governments for action.
British Columbia has the best debt position of any province in Canada. Data compiled by the bond rating agency, Moody's Investors Service, show that the province has the lowest debt as a per cent of provincial gross domestic product (GDP) as well as the lowest debt interest cost as a per cent of government revenue. However, like other provinces, British Columbia's debt has risen in recent years.
In its 1994 budget, the British Columbia government put forward a fiscal plan that focussed on the first essential step -- eliminating the provincial deficit. The government committed to eliminate the budget deficit by 1996/97 while freezing taxes for three years.
The 1995 budget achieves this goal one year ahead of schedule. With the deficit eliminated, a longer-term plan is needed to pay down accumulated direct debt and control the growth of total taxpayer-supported debt.
Commercial Crown corporation debt totalled $8.1 billion as of March 31, 1995, accounting for 30.1 per cent of total provincial debt. The debt of B.C. Hydro and BC Rail has grown at about 2 per cent per year over the last four years -- well below growth in the British Columbia economy. Like any private corporation, this debt has been used to expand plant and equipment to meet the growth in demand for the Crown corporations' services.
There are two types of taxpayer-supported debt -- debt to fund operating deficits and debt to fund provincial infrastructure.
Debt to fund operating deficits grew by $3.6 billion between 1991/92 and 1994/95. However, the annual deficit has now been eliminated. As a result, direct debt has stopped growing and will decline by $414 million in 1995/96. Further progress in reducing this debt will be made as budget surpluses are recorded in future years.
The practice of funding infrastructure investments by long-term borrowing has been followed in British Columbia for nearly 30 years. It is not new. Successive governments have decided that the cost of such assets should be spread over their useful life, rather than paid for in advance.
If the benefits of public infrastructure occur over several decades, it is appropriate that the costs be evenly spread among all those who benefit over that time period. This approach has been recently re-affirmed by the Premier's Summit on the Economy.
Taxpayer-supported debt to fund infrastructure grew by $2.7 billion between 1991/92 and 1994/95(2). The increase is the result of two factors:
2. Equity -- Debt financing policies should treat all British Columbians fairly. Future taxpayers should not pay for current services. Neither should current taxpayers bear the entire capital costs of providing future services.
3. Wise Capital Decisions -- Debt incurred to build new facilities should focus on high-priority needs of British Columbians. Projects should be managed to achieve maximum value for money.
4. Sound Management -- All outstanding provincial debt should be effectively managed to minimize risk and achieve the lowest possible interest costs.
5. Innovation -- New, more creative ways should be developed to reduce the need for debt and to make the most productive use of borrowed funds. These include better use of existing facilities, partnerships with the private sector, and the sale of non-essential assets.
It follows extensive consultations with British Columbians. The Premier's Forum on Jobs and Investment identified a general lack of understanding of the province's financial situation, and the need for a longer-term fiscal plan. The Premier's Summit on the Economy recommended the adoption of objective and easily understood benchmarks to measure the province's fiscal and debt situation. Follow-up meetings achieved consensus on these benchmarks and the consensus is reflected in this plan.
The Debt Management Plan adopts four key goals. Based on the recommendations of the Premier's Summit participants, it also establishes specific benchmarks against which progress in achieving these goals can be measured over time.
2. Eliminate over 20 years, the $10.2 billion in debt incurred from previous budget deficits, by using budget surpluses to pay down debt.
3. Reduce total taxpayer-supported debt as a share of British Columbia's gross domestic product from its current level of 19.1 per cent, the lowest in Canada, to 10.2 per cent within 20 years.
4. Cap the interest cost of taxpayer-supported debt to ensure that this cost does not exceed 8.5 per cent of provincial revenue in any year over the next 20 years.
Table S1 summarizes the specific benchmarks established for every five-year period over the life of the plan. Table S2 shows projected targets for the medium term -- the first five-year period of the plan.
The Auditor General will be requested to review the annual Debt Management Progress Report, and provide an opinion to the Legislative Assembly on its completeness and accuracy.
Year Ending March 31 Goal/Benchmark 1996 2000 2005 2010 2015 Maintain B.C. Credit Rating Credit Rating Relative to Other Provinces......... Highest Highest Highest Highest Highest Repayment of Direct Debt Debt at Year End ($ billions)..................... 9.8 8.9 5.9 2.9 0.0 Taxpayer-Supported Debt Debt as a Per Cent of Provincial GDP.............. 18.8 18.1 15.2 12.5 10.2 Debt Interest Bite Interest Expense per Dollar of Revenue (cents)... 7.4 7.9 7.0 6.0 5.0 Note: The plan is based on certain underlying economic assumptions set out in Appendix E2. The plan commits the government to achieve these benchmarks, regardless of actual economic performance.
Year 1995/96 1996/97 1997/98 1998/99 1999/2000 ------- ($ millions, unless otherwise indicated) -------- Revenue before Federal Funding Cuts.................. 20,353 20,750 21,410 21,810 22,690 Expenditures......................................... 20,186 20,210 20,510 20,820 21,330 Budget Surplus before Federal Funding Cuts(1)........ 167 540 900 990 1,360 Budget Surplus after Federal Funding Cuts............ 114 25 40 125 500 Debt Repayment from Investments(2)................... 300 200 0 0 0 Total Direct Debt Repayment.......................... 414 225 40 125 500 Total Taxpayer-Supported Debt as a Per Cent of GDP... 18.8 18.7 18.7 18.6 18.1 Interest Bite (cents)................................ 7.4 7.6 7.9 8.0 7.9 (1) Only federal cuts announced in 1994 and 1995 are counted here. These are on top of significant federal offloading that took place beginning in 1982. (2) Includes sale of British Columbia Endowment Fund assets and cash management transactions.
British Columbia's debt position is the best of any jurisdiction in Canada. Data compiled by the bond rating agency, Moody's Investors Service, shows that the province has by far the lowest debt as a percentage of provincial gross domestic product (see Chart E7) and the lowest debt service cost. British Columbia's debt service cost is 7 cents of every dollar of revenue compared to 13 cents for Alberta and 34 cents for the federal government. However, like other provinces, British Columbia's debt has risen in recent years.
Canada's growing government debt creates a number of problems. As debt accumulates, interest on debt becomes an ever larger share of government spending. Every year, less money is available for programs and more goes to banks and investors.
A growing public sector debt also makes Canada more reliant on foreign investment and reduces the country's economic sovereignty. In addition, debt incurred to finance the day-to-day operations of government shifts the bill away from today's consumer of government services and on to future generations.
In British Columbia, reporting of revenues, expenditures, and deficits is done in two ways. The first method, called the Consolidated Revenue Fund (CRF), covers all expenditures made directly by government and all revenues collected to fund them.
The provincial government's budget surplus or deficit has been reported on a CRF basis since Confederation.
The second method, called the Summary Financial Statements, covers both direct government financial operations and the financial results of all agencies and enterprises owned by the provincial government.
The government's public accounts report financial results on both a CRF and Summary Financial Statements basis. As shown in Chart E1, the choice of reporting method does not markedly alter the surplus/deficit position.
[ Chart E1 -- B.C. Deficit/Surplus ]
British Columbia's public sector debt can be broken down into two types, commercial debt and taxpayer-supported debt (see Chart E2).
[ Chart E2 -- Categories of Debt ]
The debt of commercial Crown corporations totalled $8.1 billion as of March 31, 1995, accounting for 30 per cent of total provincial debt.
There are two types of taxpayer-supported debt:
Physical assets include the value of such things as roads, buildings, plant and equipment, and other public facilities. These assets are owned either by government directly or by its Crown corporations and other agencies. As shown in Table E1, British Columbia public-sector physical assets have a book value of $32 billion and a replacement value of $62 billion.
The government will review the potential sale of assets, the proceeds of which could be used to reduce debt.
Estimated Net Replacement Book Value Cost ----- ($ billions) ----- Value of Provincial Government Assets............... 8 16 Value of Crown Corporation Assets.................... 14 26 Value of Assets of Institutions (includes schools, universities, hospitals).......................... 10* 20 --- --- Total............................................... 32 62 === === * Current value of depreciated capital stock from Statistics Canada. Source: Province of British Columbia, 1993/94 Public Accounts; Statistics Canada, Investment and Capital Stock Division; and Ministry of Finance and Corporate Relations estimates.
Financial assets are instruments which could be converted to cash -- bank balances, accounts receivable, mortgages, stocks and bonds, and investments in Crown enterprises on the province's Summary Financial Statements. As of March 31, 1994, $26 billion in government liabilities were offset by $14 billion in financial assets for a net liability of $12 billion.
[ Chart E3 -- Total Debt as a Per Cent of GDP ]
This trend was aggravated by the federal government's offloading of its responsibilities for health, post-secondary education and social services on to the provinces. Between 1991/92 and 1994/95 federal government offloading cost British Columbia $6.5 billion, accounting for more than the $3.6 billion increase in direct debt during that period.
Between 1991/92 and 1994/95, the province's operating deficit was brought down from $2.4 billion to under $400 million. In 1995/96 the province will run an operating surplus of $114 million. With this operating surplus and the sale of British Columbia Endowment Fund assets, the direct debt will fall by $414 million by the end of the 1995/96 fiscal year. Further progress in reducing direct debt will be made as budget surpluses are recorded in future years.
[ Chart E4 -- B.C. Taxpayer-Supported Debt ]
The practice of funding infrastructure investments by long-term borrowing has been followed in British Columbia for nearly 30 years. It is not new. Successive governments have decided that the cost of such assets should be spread over their useful life, rather than paid for in advance. The issue is one of fairness. If the benefits of public assets occur over several decades, it is appropriate that the costs be evenly spread among all those who benefit over that period.
This policy of borrowing to finance major investments has also been influenced by the rapid growth of the British Columbia economy and a high population growth rate. Paying in advance for capital investment would place a large burden on the current population and make it difficult to provide basic facilities to support new businesses and new residents.
Making a distinction between day-to-day operating expenses and large up-front capital investments is common practice in the private sector. While the former are recorded as they occur, the costs of the latter are spread over the useful life of the asset. Similarly, using long-term borrowing to finance large new investments in plant and equipment is common in the private sector.
In 1993, the government added highway capital construction to the list of infrastructure amortized. Previously highways represented the only major long-term capital spending still expensed. This change was made to ensure consistency with other types of transportation funding and provide for better capital planning to meet growing transportation needs. It also provided for the use of dedicated revenue sources to finance highway capital construction.
Some have argued that government should not incur any debt at all, regardless of what it is used for. All debt is bad and all capital investments should be made on a pay-as-you-go basis. If British Columbia were to follow this approach, the entire cost of building capital facilities for the future would be borne by today's taxpayers. This added burden on taxpayers would likely lead to lower rates of public investments and increased backlogs in key areas like education and transportation.
Again, the private sector is a useful comparison. Most businesses could not operate this way. Without debt financing, businesses would find it much more difficult to finance inventory or make the new investments in plant and equipment necessary to expand their operations.
British Columbia's infrastructure debt increased rapidly in the early 1980s, reflecting provincial population and economic growth. Fiscal pressure in the mid-1980s resulted in sharply lower levels of capital investment and infrastructure debt dropped. Renewed growth and population inflow resulted in a resumption of debt growth in the 1990s.
British Columbia's infrastructure debt has increased by $2.7 billion over the last three years.(3) As shown in Chart E5, new transportation investments accounted for 41 per cent of this increase, health and educational facilities for 38 per cent, and municipal infrastructure (roads, sewers and water) for 12 per cent.
The growth of infrastructure debt during the 1990s has been due to two factors.
Between 1985 and 1995, British Columbia's population grew at an average annual rate of 2.2 per cent per year, much faster than Canada as a whole. This rapid growth added 700,000 people to British Columbia's population, creating new demands for public facilities. New ferries and buses had to be added, roads became congested, new schools had to be built, and new housing development created the need for new water and sewer lines.
The growth of British Columbia's economy and population began to accelerate at a time of greatly reduced capital funding. As shown in Chart E6, capital budgets were cut sharply in the mid-1980s to control debt growth, and significant backlogs emerged. Therefore, during the 1990s the provincial government was faced with both providing for the needs of current growth and catching up with past growth.
Some of this backlog has been now been addressed by increased capital spending over the last four years, but pressures for new investments remain strong. For example:
Despite these pressures, debt to finance new capital needs cannot grow indefinitely at the rates of the last four years. Therefore, capital spending allocations will be cut over the next four years, and spending will be targeted to areas where backlogs remain a serious problem.
For the longer term, the provincial government is investigating new, innovative ways of meeting the growing demand for public infrastructure. One approach is to increase the use of existing public buildings. For example, the government recently introduced a year-round schooling pilot project which will help make more effective use of our school buildings. Other options include cutting costs through more effective building designs, and entering into financing arrangements with private-sector partners. However, difficult trade-offs must continue to be made to balance investment requirements with the need to keep infrastructure debt affordable.
There is no universally accepted method for determining whether any given level of government debt is affordable, and opinions differ. Bond rating agencies and investors assess the ability of borrowers to repay debts when making credit rating and investment decisions. Taxpayers ultimately communicate their views on affordability at the ballot box.A number of key indicators have been used to put debt levels into perspective, make comparisons among jurisdictions, and help make judgements about affordability. Indicators recommended by British Columbia's Auditor General include:
Historical data on these and other indicators is contained in Appendix E1.
- Debt to Revenue -- the ratio of debt outstanding at year end compared to revenue from all sources during the year.
- Debt per Capita -- the ratio of debt to total population.
- Interest Bite -- how much of each dollar of provincial revenue is used to pay for debt service costs.
- Total Cost of Borrowing -- the sum of interest paid on debt, plus associated borrowing costs minus investment income from sinking funds.
- Debt to GDP -- the ratio of debt outstanding at year end to provincial gross domestic product (GDP).
One way of assessing affordability of debt is to compare it to other jurisdictions using the above indicators. As shown in Chart E7, British Columbia has the lowest debt to GDP ratio in Canada. It also has the lowest interest bite on its outstanding debt.
Ultimately, the best means of assessing affordability is to look at the relative credit ratings given by major bond rating agencies. A high credit rating means that rating agencies consider a jurisdiction's debt to be relatively affordable with a low probability of default. As shown in Chart E8, British Columbia has the highest credit rating of any Canadian province.
[ Chart E7 -- Provincial Taxpayer-Supported Net Debt at March 31, 1995 ]
The same is true of government. Debt can play a positive role in financing the infrastructure necessary for continued economic growth. But consistent borrowing to finance government deficits can lead to the accumulation of debt, with more tax dollars going to banks to pay interest, and less to provide services for people.
Over the last several years, public awareness of federal and provincial debt levels has increased significantly. Canadians are concerned about the escalation of debt at both the federal and provincial levels, and are looking to their governments for action.
In response to these concerns, a number of provinces have introduced balanced budget requirements, either in the form of policy commitments or as legislation. Some provinces have achieved, or are close to achieving, a balanced budget, and have put forward plans to repay accumulated debt.
In its 1994 budget, the British Columbia government put forward a fiscal plan which focussed on the first essential step -- eliminating the provincial deficit. The government committed to eliminate the budget deficit by 1996/97 while freezing taxes for three years. The 1995 budget achieves this goal one year ahead of schedule. With the deficit eliminated, a longer term plan is needed to pay down accumulated direct debt and control the growth of total taxpayer-supported debt.
2. Equity -- Debt financing policies should treat all British Columbians fairly. Future taxpayers should not pay for current services. Neither should current taxpayers bear the entire capital costs of providing future services.
3. Wise Capital Decisions -- Debt incurred to build new facilities should focus on high priority needs of British Columbians. Projects should be managed to achieve maximum value for money.
4. Sound Management -- All outstanding provincial debt should be effectively managed to minimize risk and achieve the lowest possible interest costs.
5. Innovation -- New, more creative ways should be developed to reduce the need for taxpayer-supported debt and to make the most productive use of funds which must be borrowed. These include better use of existing facilities and partnerships with the private sector. The province will consider selling non-essential assets and using the proceeds for debt reduction.
It follows extensive consultations with British Columbians. The Premier's Forum on Jobs and Investment identified a general lack of understanding of the province's financial situation, and the need for a longer-term fiscal plan. The Premier's Summit on the Economy recommended the adoption of objective and easily understood benchmarks to measure the province's fiscal and debt situation. Follow up meetings achieved consensus on these benchmarks and the consensus is reflected in this plan.
The Debt Management Plan adopts four key goals. Based on the recommendations of the Premier's Summit participants, it also establishes specific benchmarks against which progress in achieving these goals can be measured over time.
2. Eliminate over 20 years, the $10.2 billion in debt incurred from previous budget deficits, by using budget surpluses to pay down debt.
3. Reduce total taxpayer-supported debt as a share of British Columbia's gross domestic product from its current level of 18.8 per cent, the lowest in Canada, to 10 per cent within 20 years.
4. Cap the interest cost of taxpayer-supported debt to ensure that this cost does not exceed 8.5 per cent of provincial revenue in any year over the next 20 years.
Year Ending March 31 Goal/Benchmark 1996 2000 2005 2010 2015 Maintain B.C. Credit Rating Credit Rating Relative to Other Provinces..... Highest Highest Highest Highest Highest Repayment of Direct Debt Debt at Year End ($ billions)................. 9.8 8.9 5.9 2.9 0.0 Taxpayer-Supported Debt Debt as a Per Cent of Provincial GDP.......... 18.8 18.1 15.2 12.5 10.2 Debt Interest Bite Interest Expense per Dollar of Revenue (cents) 7.4 7.9 7.0 6.0 5.0
Table E3 shows projected targets for the medium term -- the first five-year period of the Debt Management Plan.
The economic and financial assumptions underlying Tables E2 and E3 are presented in Appendix E2.
Year 1995/96 1996/97 1997/98 1998/99 1999/2000 -------- ($ millions, unless otherwise indicated) ------- Revenue before Federal Funding Cuts................ 20,353 20,750 21,410 21,810 22,690 Expenditures....................................... 20,186 20,210 20,510 20,820 21,330 Budget Surplus before Federal Funding Cuts(1)...... 167 540 900 990 1,360 Budget Surplus after Federal Funding Cuts.......... 114 25 40 125 500 Debt Repayment from Investments(2)................. 300 200 0 0 0 Total Direct Debt Repayment........................ 414 225 40 125 500 Total Taxpayer-Supported Debt as a Per Cent of GDP 18.8 18.7 18.7 18.5 18.1 Interest Bite (cents).............................. 7.4 7.6 7.9 8.0 7.9 (1) Only federal cuts announced in 1994 and 1995 are counted here. These are on top of significant federal offloading that took place beginning in 1982. (2) Includes sale of British Columbia Endowment Fund assets and cash management transactions.
The Government of British Columbia is committed to maintaining its credit rating relative to other provinces, and has established this benchmark as a key component of the Debt Repayment Plan.
The Columbia River downstream benefits to the province will total over $5 billion over the next 30 years. The government recently announced a Columbia Basin Accord, which includes an investment in the region of $1 billion over the next decade. The remainder of the downstream benefits will be fully allocated to debt reduction.
[ Chart E8 -- Provincial Credit Ratings, 1995 ]
The Debt Management Plan commits the government to repaying, over a 20-year period, $10.2 billion in outstanding direct debt. The repayment schedule is summarized in Table E4. It is based on four five-year periods commencing April 1, 1995. It should be noted that government is required to do significantly better than simply balancing the budget over each five-year period. The debt repayment requirements mean that it must also take in significantly more money than it spends.
Five-Year Period 1996-2000 2001-2005 2006-2010 2011-2015 --------------- ($ millions) ---------------- Average Debt Repayment....................... 260 600 600 580 Total Five-Year Repayment.................... 1,300 3,000 3,000 2,900 Total Direct Debt at End of Period........... 8,900 5,900 2,900 0
Table E4 is based on average values for five-year intervals over the 20-year life of the plan. Year-to-year values will fluctuate with movements in factors such as interest rates over the economic cycle.
Over the last two years real per capita spending by the provincial government has been declining. If the above targets for debt repayment are to be met without increasing taxes, the level of real per capita spending must continue to decline.
The federal government's recent decision to offload the costs of health and education programs increases the pressure to reduce the cost of government. Two years from now, the provincial government will see its revenues reduced $860 million or 4 per cent. Therefore, the government will continue to cut spending in real per capita terms and to reduce the size of the provincial government relative to the economy as a whole.
As shown in Tables E2 and E3, debt interest costs do not rise above 8 cents per dollar of revenue over the period of the plan. The 8.5-cent ceiling is adopted to account for uncontrollable factors such as interest rates.
Interest costs will also be contained through effective debt management (see Appendix E3).
Each year, the provincial government will issue a provincial Debt Management Progress Report. It will update the medium-term plan shown in Table E3, and record progress made in meeting each of the five-year targets set out in Table E2. If progress is not being made, it will identify the reasons and identify actions that are needed to put the plan back on track.
The Debt Management Progress Report will cover not only the four key benchmarks set out above, but will bring together, in one document, a comprehensive picture of the province's debt situation. It will include the debt indicators recommended by the Auditor General in his review of the 1993/94 Public Accounts. These indicators include:
1991/92 1992/93 1993/94 1994/95 1995/96 Debt to Revenue(1) (per cent)................ 73.0 85.3 87.7 84.3 83.2 Debt per Capita ($).......................... 3,713 4,569 5,031 5,126 5,187 Interest Bite (cents per dollar of revenue) -- Taxpayer-Supported Debt................. 6.4 6.9 7.0 7.2 7.4 -- Total Debt(2)........................... 7.7 8.8 8.5 8.6 8.6 Total Cost of Borrowing(3) ($ million)....... 1,096 1,293 1,437 1,609 1,740 Debt to GDP (per cent)....................... 15.4 18.4 19.5 19.1 18.8 Debt at Year End ($ billion) -- Taxpayer-Supported...................... 12.5 15.9 18.0 18.8 19.5 -- Total Provincial........................ 20.0 23.4 25.9 26.9 27.9 Interest rate (per cent) -- On Taxpayer-Supported Debt.............. 10.4 9.7 9.4 8.9 9.0 Background Information: Revenue ($ billion)......................... 17.2 18.6 20.5 22.3 23.5 Nominal GDP ($ billions).................... 81.3 86.3 92.1 98.7 103.7 Population (thousands)...................... 3,380 3,479 3,574 3,668 3,765 (1) Includes revenue of the CRF plus revenue of the government agencies whose debt is taxpayer-supported. (2) As calculated by the Auditor General for 1991/92 to 1993/94; 1994/95 and 1995/96 are Ministry of Finance and Corporate Relations estimates. (3) For taxpayer-supported debt.
These assumptions should, therefore, be seen as mid-points in a range of possible outcomes. The Debt Management Plan commits the government to achieving the stated benchmarks, notwithstanding potential variability in the underlying economic and financial assumptions.
The challenges posed by the market environment require the province's debt management program to be streamlined, efficient and sufficiently flexible to respond to the lowest-cost financing opportunities afforded by the domestic and international capital markets. It also entails instituting policies and controls which establish the appropriate framework for undertaking debt management in the province.
The primary objective of the province's debt management program is to achieve the lowest cost financing at an acceptable level of risk. The province accepts only low levels of risk which are judged appropriate for a risk-averse public-sector borrower.
The province's debt management program is operated centrally by Provincial Treasury of the Ministry of Finance and Corporate Relations, on behalf of the government, Crown corporations and agencies. As fiscal agent, the government borrows directly in the financial markets and relends the proceeds to Crown corporations and agencies. This centralized borrowing program provides lower-cost financing to Crown corporations by taking maximum cost advantage of the province's superior credit rating (AA+ with Standard & Poor's Corporation and Aa1 with Moody's Investors Service). The province is also able to respond in a timely way to changes in market conditions without risk of market competition from its own agencies. Further, a centralized debt management function eliminates duplication among treasury departments in Crown corporations and agencies.
Provincial Treasury's implementation of the debt management program is subject to control by the ministry's senior executive risk committee. The committee sets risk and policy parameters, ensures compliance within these parameters, and approves the annual debt management strategy and quarterly updates.
The following discussion reviews the key risk and policy parameters which form the framework for conducting debt management in the province.
In 1994/95, the government instituted prudent measures to help safeguard against the possibility of severe financial market volatility impairing the province's financing ability. These measures included:
On May 10, 1994, the province launched its Euro-debt issuance program (EDIP), which allows the province to gain more efficient and cost-effective access to European financial markets. EDIP has raised about $1.6 billion to date, all of which was in the form of yen-denominated notes fully converted back to Canadian dollar obligations by use of financial products. Compared to the cost of borrowing these funds domestically, EDIP saved the province $1.7 million.
The province also actively diversifies its financing program in Canada by attracting investors who are looking for alternatives to domestic public bond issues:
Neither the government nor its Crown corporations has debt exposure to currencies other than U.S. or Canadian dollars.
The ministry's risk committee has set the maximum allowable U.S. dollar exposure for the government, excluding Crown corporations, at 10 per cent of net debt. U.S. dollar exposure was approximately 5 per cent as at February 28, 1995, or U.S. $554 million.
Among the Crown corporations, only British Columbia Hydro and Power Authority (B.C. Hydro) carries U.S. dollar debt exposure. B.C. Hydro's U.S. dollar debt obligations are largely hedged through B.C. Hydro's U.S. dollar revenue inflows, as well as through other financial hedges entered into over the past few years. B.C. Hydro's unhedged U.S. dollar debt exposure was 25.1 per cent of its gross debt as at February 28, 1995, or U.S. $1.7 billion, well within B.C. Hydro's 30 per cent authorized limit.
The ability to offset or hedge exposures through the use of financial products lends flexibility to the funding program by:
(1) The full Debt Management Plan begins on p. 45.
(2) A further $1.7 billion in infrastructure was financed over this period from operating deficits.
(3) A further $1.7 billion in infrastructure was financed over the period from operating deficits.
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