Gross long-term borrowing by Canada’s three tiers of government will ease slightly in 2005, as declining federal government borrowing requirements offset somewhat larger needs by local and regional governments.

Standard & Poor’s Ratings Services projects that total federal, provincial, and municipal government issuance is expected to reach about $90 billion in long-term debt in 2005, which represents a modest decrease of 1% compared with 2004.

Federal borrowing in 2005 is forecast to fall by about 10% from the level in 2004 to close to $37 billion due to the government’s growing fiscal surplus, S&P says. In contrast, gross issuance by the provinces and municipalities is estimated to increase by about 5% in 2005 to $53 billion, driven primarily by deficits posted by some of the larger provinces and generally higher refinancing activity.

“For the provinces as a whole, expectations of strengthening budgetary performances in the next year should contribute to declining borrowing requirements in 2006. Municipal issuance, while a small share of overall gross public sector borrowing in Canada, could see some increases in the years ahead as municipalities across the country address inadequacies in basic infrastructure,” S&P says.

“In 2004 and 2005, provincial annual gross borrowing is outstripping federal issuance, which is a departure from the historical trend,” said Standard & Poor’s credit analyst Valerie Blair. “The fact that the provinces are now a more significant borrower than their federal counterpart points, in particular, to their vast funding requirements for rapidly growing health and education budgets,” Blair added. In contrast, the federal government is now generating sufficient budgetary surpluses to repay debt.