In a revealing analysis, bond rating agency Morningstar DBRS has declared this year’s provincial budget as largely prudent, notwithstanding its record levels of spending and borrowing.

However, there are significant caveats. The agency highlights that the volatility of commodity prices poses a major risk, particularly as the government sets its budget projections based on an optimistic oil price of $73 per barrel.

As of yesterday, Brent crude was trading at only $65 per barrel, indicating a potential shortfall exceeding $200 million if these prices persist. With the fiscal year just starting, many analysts have yet to adjust their forecasts, raising concerns about future revenues.

Despite this uncertainty, Morningstar DBRS remains cautiously optimistic, suggesting that the province’s credit ratings maintain enough flexibility to weather a period of economic unpredictability.

Interestingly, the revenue forecast also benefits from a recently signed Memorandum of Understanding (MOU) with Quebec, although formal agreements are still pending.

On a long-term view, net debt is projected to rise to 44.7% in the 2025-26 fiscal year, a slight increase from the previous year but still better than the peak of 49.8% recorded back in 2020-21.