Gross long-term debt issuance by Canada’s three tiers of government is expected to decline slightly in 2006, according to a new report from Standard & Poor’s Ratings Services.

It notes that borrowing requirements are receding, particularly among the provinces, reflecting strengthening budgetary outcomes overall. The report says that provincial and municipal gross long-term borrowing totaled approximately $38 billion in 2005, slightly outstripping that of the federal government, which issued $35 billion last year.

“The federal government has been gradually reducing its capital markets debt, by between $2 billion and $10 billion per year, since 1997,” said Standard & Poor’s credit analyst Valerie Blair, in a release. “This primary direction is expected to remain in place in 2006, despite the change in government resulting from the federal election,” Blair added.

Gross long-term borrowing by the provinces and municipalities across the country is estimated to decline this year to approximately $33 billion. S&P says that the decline is largely attributable to the provinces’ improving budgetary positions, underpinned by expenditure restraint and improving revenue performance thanks to both the resilient Canadian economy and enhanced federal government transfers.

“This declining trend in provincial and municipal borrowing might be relatively short-lived, given looming significant infrastructure spending needs especially in the areas of health, education, utilities (water and electric), and transportation,” it adds. “Governments across the country greatly restrained infrastructure spending through the 1990s, and many recognize the need to address the deficiencies.”