British Columbia’s credit rating has been downgraded by Moody’s, which says the province’s finances have deteriorated markedly under the weight of large structural deficits, rising debt and continued spending growth, prompting Premier David Eby to claim his government chose to keep funding health care and infrastructure instead of chasing a better rating.
Moody’s said Wednesday it lowered B.C.’s baseline credit assessment and cut the province’s long-term issuer and senior unsecured debt ratings to Aa2 from Aa1. The agency also downgraded B.C.’s senior unsecured program and shelf ratings, while keeping its commercial paper rating unchanged. The outlook remains negative.
In a detailed rationale, Moody’s said the move reflects a “marked deterioration in the province’s credit fundamentals,” driven by continued growth in operating and capital spending that has produced “large, structural deficits and rising leverage.”
The agency said the province’s latest budget showed “a deterioration in long-term fiscal management” and pointed to “limited progress and visibility toward balanced budgets,” along with “reduced fiscal policy predictability and weaker risk controls.”
B.C.’s February budget projected a record deficit of $13.3 billion in 2026-27, followed by deficits of $12.2 billion and $11.4 billion over the next two years. Moody’s said the projected pace of improvement remains too slow and the province has not laid out a clear timeline for a return to balance.
The rating agency also said B.C. continues to rely heavily on borrowing to fund both its operating shortfalls and a large capital plan, projecting net direct and indirect debt will rise to $178.5 billion in 2026-27 and reach $230 billion by 2028-29.
That would push the province’s debt burden sharply higher relative to revenue and leave British Columbia moving “from having one of the lowest debt burdens to having one of the highest among regional peers,” Moody’s said.
It also warned that debt affordability is worsening. Interest costs are projected to rise to six per cent of revenue in 2026-27 and 7.9 per cent by 2028-29, up from an estimated 4.7 per cent in 2025-26.
Eby, speaking at an event in Metro Vancouver, said his government had made a conscious choice.
“We have to meet people where they’re at,” he said. “They are sicker and they stay in hospital longer. We need to ensure high-quality health care services and services for British Columbians generally. We have to build these projects to get our province moving.”
He said the province had faced a basic question in this year’s budget.
“Were we going to – as the Conservatives suggested – make health care bear the brunt of cuts to be able to meet a credit rating?” Eby asked. “Or were we going to make sure that we were doing all we can to deliver services for British Columbians, find efficiencies in government and grow the economy to make sure that we’re able to pay for the services British Columbians deserve?”
Finance Minister Brenda Bailey said in a statement that despite the downgrade, B.C. remains one of the highest-rated provinces in Canada and still has strong access to global capital markets.
Moody’s did acknowledge several strengths in the province’s profile, including what it called a resilient and diversified economy, a broad tax base and lower reliance on a single export market than many peers. It also said B.C. maintains strong access to domestic and international borrowing markets and adequate liquidity.
But it said those strengths are being offset by worsening fiscal metrics and heightened economic risk, especially from global trade instability and uncertainty tied to the United States.
The agency said B.C.’s exports are more diversified than those of many other provinces, but key sectors including natural gas, electricity and lumber remain exposed to U.S. trade uncertainty. It also pointed to growing environmental risks from wildfires and floods, as well as persistent spending pressure from health care, education, housing supply and affordability.
The negative outlook means Moody’s sees a risk of another downgrade if deficits remain larger for longer, debt grows faster than forecast, or the province’s fiscal flexibility weakens further.
The Opposition Conservatives seized on the decision, saying it's the fifth downgrade in four years from major credit-rating agencies and arguing it reflects a broader loss of confidence in the government’s fiscal direction.
“Bond rating agencies are giving the NDP budget the equivalent of an F,” interim Conservative leader Trevor Halford said in a statement. “The government needs to take this seriously, go back to the drawing board, and table a budget that will restore confidence in world financial markets.”
“B.C. is going broke,” he added.
The downgrade lands as B.C. is already facing a softer economic backdrop, with rising borrowing costs, slower growth and heightened trade uncertainty clouding the province’s outlook. Moody’s said that while new revenue measures, spending restraint efforts and large contingencies offer some mitigation, they are not enough to offset the scale of the fiscal deterioration now underway.
For Moody’s to stabilize the outlook, it said the province would need to implement a credible plan to slow debt growth and reduce projected deficits materially faster than is currently expected.
