Quebec ready to discuss the reduction target of the debt

Québec prêt à discuter de la cible de réduction de la dette

Photo: Jacques Boissinot The canadian Press
“In the fall, when we will show the path of five years [to return to a balanced budget], we’re all going to see that it’s going to be very difficult to reach this target,” said Eric Girard at a conference organized by the Association des économistes du Québec and the Cercle finance du Québec.

The pandemic weighs so heavily on the public finances that Quebec is considering a public debate this fall around the target flagship debt-reduction, adopted in 2006, when the government set up the generations Fund to reduce the overall weight of its borrowings to 45 % compared to the size of the economy, said on Monday the minister of Finance.

This objective has been achieved in 2019-2020, but the expenditure of several billion arising from the pandemic, will increase this figure to 50.4 % at the end of the month of march 2021, according to the economic update, published three days ago.

“In the fall, when we will show the path of five years [to return to a balanced budget], we’re all going to see that it’s going to be very difficult to reach this target,” said Eric Girard at a conference organized by the Association des économistes du Québec and the Cercle finance du Québec.

“Therefore, it is possible that we may need to change this law and this target. We are going to give the figures, we will show the trail, and we’ll have the discussion. We will have him in the Room, to the Chair in taxation from the University of Sherbrooke, in the restaurants, Québec, RDI Economy… We will discuss the relevance of keeping these targets, given the evolution of the debt and the economy, ” he continued in response to a question from the host, tax expert Luc Godbout.

Quebec will register a budget deficit of 14.9 billion in 2020-2021 and the government Legault, anticipates a return to balance over five years, which is not to be based neither on a tax increase or the erosion of public services, he repeated on Friday during the release of an economic update.

The minister Girard has not given any clue in relation to specific conclusions which could be the result of a large discussion around the targets of reduction in the weight of Québec’s debt. According to the Law on the reduction of the debt and establish the generations Fund was adopted at the beginning of 2006, the objective was to ensure that the gross debt represents 45 % of gross domestic product by march 31, 2026. The Charest government of the time wished, then, that the Quebec back to the canadian average. The Act also provides for a second target : the debt representing the accumulated deficits from 17% in march 2026.

The payments are regular in the generations Fund, managed by the Caisse de dépôt et placement, is to aim for a return higher than the cost of new borrowings by the government. In the eyes of the rating agencies, the transaction is the equivalent of a debt repayment, a factor which they take into account in the evaluation of the credit of the government and its future prospects.

To see the video

Share Button

Add a Comment

Your email address will not be published. Required fields are marked *