The Government Of Newfoundland Is Broke & Cannot Pay Workers. Weeks Away From Total Financial Chaos
The Government of Newfoundland & Labrador came within two weeks of being unable to pay its employees in all sectors in mid-April. In March the province was reporting just four cases of COVID-19 when Newfoundland and Labrador Premier Dwight Ball wrote the prime minister to warn that his province financial situation had collapsed.
It was a financial crisis that had him reaching out to Prime Minister Justin Trudeau for help. Premier Ball wrote a letter for Newfoundland and Labrador calmly explaining in very diplomatic terms that they had “run out of time.” This letter was a last resort and highlights the panic within the government as being unable to meet all their financial obligations.
The province with Canada’s worst balance sheet had just been told that financial markets were simply uninterested in buying Newfoundland and Labrador bonds. The government’s attempts to finalize both its short- and long-term borrowing programs had failed. Newfoundland and Labrador couldn’t get the money it needed in the face of a pandemic. Sources say the provincial government was on track to run out of cash by the middle of April.
“There is a point coming soon when this province will not be able to pay its public service,” a senior provincial government official said of the situation at the time.
Newfoundland and Labrador was spared that fate just days later when the Bank of Canada stepped in with a plan to buy short-term provincial bonds to “support the liquidity and efficiency” of provincial funding markets.
It was a move to help all provinces deal with the Coronavirus fallout. But the combined impact of COVID-19 and the oil price war between Russia and Saudi Arabia was hammering resource-dependent provinces like Alberta and Saskatchewan especially hard — and their borrowing costs were rising as a result.
Poloz’s move was a lifeline for Newfoundland and Labrador. Before Poloz stepped in, Ball’s minority Liberal government was just days away from an emergency session of the House of Assembly to get approval to borrow $2 billion it wasn’t sure it could raise.
‘We can make payroll’
At a press conference in St. John’s Wednesday afternoon, Ball confirmed that he wrote the letter, telling reporters he thought it was appropriate to draft some correspondence to reflect conversations he’s had with the prime minister.
The premier said the province’s borrowing picture has brightened somewhat since March 20.
“We’ve had some success this week in the markets — of course, supported with the Bank of Canada by the changes that they had made to help provinces like Newfoundland and Labrador with their borrowing requirement,” Ball said.
“So essentially, we can make payroll. We will continue to provide the services.”
You May Also Like
New Brunswick Gov. To Cover Child Care Fees For Unemployed