TORONTO (Pakistan Point News / Sputnik - 28th August, 2020) Canada could see another downgrade if the Federal government does not get its finances in order, Fitch Ratings warned in a press release.
In June, Fitch Ratings stripped Canada of its AAA debt rating citing as a reason a deterioration of the country's public finances.
"Failure to place consolidated gross general government debt/GDP on a downward path over the medium term could lead to negative rating action," Fitch said on Thursday.
Fitch pointed out that in addition to the already historically high $261.3 billion deficit, Canada has committed an additional $28.19 billion toward the extension of the novel coronavirus emergency response benefit and is about to embark on an ambition and costly long-term economic recovery plan under new Finance Minister Chrystia Freeland.
Fitch said the government debt to GDP ratio is set to exceed 120 percent of GDP - significantly higher than the benchmark for countries with a 'AA' rating - and that the deficit to GDP ratio is 5% higher than at the time of the original downgrade.
Fitch also said rime Minister Justin Trudeau's minority government's reliance on left-wing parties to pass legislation and the Canada's decentralized fiscal framework could complicate efforts to get the country's books in order.
