Nunavut government again wins high mark from global credit guru

Say what you like about the Government of Nunavut — they’re still a good credit risk, according to Moody’s Investor Services. (FILE PHOTO)

The global credit rating agency, Moody’s Investor Services, has once again announced the Government of Nunavut deserves a high Aa1 credit rating, Moody’s announced August 1.

This means lenders and investors can be reasonably confident that the GN will repay its debts.

For the GN, it means they can borrow money at lower interest rates than some other jurisdictions.

This is likely to help the territorial government after it completes a big 30-year public-private scheme for building a new $300-million aiport in Iqaluit.

In its first credit report on Nunavut, issued Aug. 21, 2012, Moody’s gave Nunavut an Aa1 mark, at the same level as Ontario and the Northwest Territories, but below that of British Columbia, which earned a triple-A rating.

In its 2013 report, Moody’s said Nunavut deserves its high rating because of “the consistent recording of surpluses, which are aided by the significant and dependable level of federal transfers.”

“Moody’s report notes that Nunavut has recorded consecutive consolidated annual surpluses since 2002-03,” the agency said in a news release.

On the other hand, Nunavut is threatened by its dependence on the federal government, high costs, and a limited economy.

“Due to the limited ability to raise own-source revenue, the reliability and predictability of federal transfers plays an important role in Nunavut’s rating,” Michael Yake, an assistant vice-president of Moody’s, said the news release.

This also means that although Nunavut’s revenues are fairly secure right now, its spending is more difficult to predict.

“With a population of approximately 34,000 inhabitants, who occupy a territory that compromises one-fifth of Canada, Nunavut faces fiscal challenges not seen among Canadian provinces. The cost to deliver services are much higher compared to those of Canadian provinces,” Moody’s said.

The GN’s current debt burden equaled 10.2 per cent of its revenues as of March 31, 2012, which Moody considers “low.”

Most of that consists of long term debt obligations carried by the Nunavut Housing Corp. and the Qulliq Energy Corp., which were inherited from the Northwest Territories.

But the territorial government’s long-term debt is expected to rise after they finish a deal with a group of companies called Arctic Infrastructure Partners to build the $300-million aiport in Iqaluit, Moody’s said.

Right now, the Nunavut government is allowed to take on up to $400 million in long term debt, an amount that is equal to 22.7 per cent of the GN’s total spending in 2011-12.