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Two credit-rating agencies have issued warnings to the Ontario government over its plan to run deficits over the next several years.

On Thursday, both Moody’s Investor Service and DBRS said the fiscal plan set out by the Liberal government in its 2018-19 budget, which includes billions in new spending, would harm the province’s credit profile over the long term.

“It demonstrates in the clearest terms that the province is not committed to disciplined … fiscal policy,” DBRS analysts said in a report.

Both agencies stopped short of downgrading Ontario’s debt, but stressed that the province’s creditworthiness could come under pressure as a result of abandoning its commitment to balanced budgets.

On Wednesday, Finance Minister Charles Sousa tabled the 2018-19 budget – the government’s last before the spring election. Speaking to the legislature, Mr. Sousa first announced a $600-million surplus for the fiscal year just ending – the first time the province’s books have been in the black in a decade. But emerging economic threats now call for a return to deficit spending, he said.

“We are choosing to put our strengthened fiscal position to work,” he said. Over the next three years, new spending on programs for health care, mental health and pharmacare are projected to produce deficits of between $6-billion and $7-billion a year.

Mr. Sousa also set out a “clear plan to track back to balance,” which would see the deficit eliminated by 2024-25.

Counting on the provincial economy to grow steadily over the next seven years is a questionable approach, said Doug Porter, chief economist at the Bank of Montreal.

“This is not a one-time boost, this is a sustained spending effort. And I think that’s the real concern for rating agencies,” Mr. Porter said.

DBRS questioned the rationale behind introducing new stimulus spending when the provincial economy is doing relatively well.

As Mr. Sousa pointed out on Wednesday, Ontario’s economy has grown by an average of 2.7 per cent annually over the past three years, outpacing growth in all Group of Seven countries, including Canada.

“The province has made a deliberate decision to pursue expansionary fiscal policy potentially near the peak of the economic cycle,” the DBRS report said.

With growth set to slow considerably in the years ahead, the proposed path back to balance may well coincide with a weak economy or even a serious downturn.

“With interest rates set to rise, economic growth expected to moderate and program spending entrenched, eliminating the budget deficit will prove challenging in the coming years,” DBRS said.

The province will also need to increase its borrowing to finance the spending shortfall, adding to an already sizeable net debt – now at about $308-billion and forecast to rise to $325-billion, or more than $22,500 for every Ontarian, in the 2018-19 fiscal year.

“The planned return to deficits is credit negative as it will raise borrowing requirements, adding to Ontario’s already elevated debt burden, and raises the likelihood that the province is facing a structural deficit,” said Michael Yake, Moody’s Toronto-based vice-president and senior analyst, in a report. A structural budget imbalance stands in contrast to a temporary deficit based on short-term pressures.

Ontario’s Progressive Conservative opposition also took issue with the government’s spending plan during Question Period Thursday. Finance critic Vic Fedeli called the Liberals an “undisciplined, spendthrift government.

“Their desire to cling to power will doom Ontario to six more years of deficits just to announce election promises that no one trusts they will ever keep,” Mr. Fedeli said.

He said his party, under new Leader Doug Ford, would balance the budget without cutting any positions in the government. The Tories have yet to unveil their electoral platform or a plan to balance the books.

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