Letter: Province not being prudent with our debt

Editorials and commentary

Posted By Peter George Dyck

Posted 1 month ago

The provincial debt is expected to balloon by more than $3.3 billion this year alone, to more than $26 billion overall. (You can confirm this number by searching Bill 38, Loan Act, 2010 on your computer.)

Section two of the Loan Act, which I along with my Progressive Conservative colleagues voted against, increases the government borrowing authority.

This is one of the reasons why I voted against the Loan Act, and I also thereby voted against the budget.

All that extra debt will only serve to handicap our province well into the future.

Today, interest rates are near an all-time low, the prime rate of interest is currently at 2.75 per cent. This is a very attractive rate of interest, and one which encourages people to borrow more because the interest payments are very low, even on large amounts of money.

Take for example, a young couple who purchases a very opulent home for $1 million. The $1 million mortgage, at a 2.75 per cent interest rate, will cost $27,500 per year, or $2,291 per month.

Many young couples can afford to make payments of $2,291 per month, particularly if they have professional jobs. However, interest rates have nowhere to go but up, and the talk is that rates will increase over the next few years.

If the interest rate doubles to 5.50 per cent (still a modest rate of interest), this young couple's monthly payment will increase to $4,582, an amount they will not likely be able to afford. As a result, they may lose their home in the process and have to declare bankruptcy.

Transfer this scenario to our provincial debt, which is about to balloon to over $26 Billion. If interest rates double (which may almost be certain) to 5.50 per cent, the interest paid on that debt will double from $715 million per year to $1.43 billion per year – an increase of $715 million.

The provincial government does not have the option of going bankrupt like that young couple does – its only option is to cut costs by cutting services and programs or to increase taxes to make up the difference – or both.

Is it responsible to increase the province's debt because interest rates are low? Obviously not. It would instead be prudent to pay down the debt – something that the NDP will never do.

Peter George Dyck

MLA - Pembina

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