Ontario’s Debt Downgrade

On Thursday, Moody’s announced that it was dropping Ontario’s debt rating from Aa-1 to Aa-2, which affects $202 billion in debt securities.  Moody’s cites Ontario’s growing debt burden and its challenges to limit spending as the primary reasons behind this downgrade.

Two other credit agencies also have also made announcements about Ontario’s debt rating.  DBRS maintained its “stable” outlook, while Standard and Poor revised its outlook to “negative” from “stable.”

The province of Ontario currently pays $10 billion each year to service its debt.  Although the Aa-2 rating does not have an immediate impact on Ontario’s ability to borrow or service its debt, it will become more difficult for Ontario to borrow money if its credit rating slips further below Aa-2.

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