CEO's Corner
Hi, I’m Gadi Mayman, CEO of the Ontario Financing Authority. Thank you for joining me for the next few minutes.
We thought that we’d try something a little different this time and just have me speak as a voice-over as you watch our slides, instead of being distracted by video of me. Please let us know if you prefer this new format.
On May 2, the Minister of Finance released the Province’s 2013 Budget. I’d like to take this opportunity to update you on last year’s borrowing program, our borrowing plans for the 2013–14 fiscal year, and finally, to have a brief discussion about the Province’s debt.
Last fiscal year, which ended on March 31st, we borrowed $36.6 billion in long-term public debt. This is greater than the $34.5 billion that we’d said we’d borrow at the time of the Winter Update in January, in spite of the 2012–13 deficit now projected to be $2.1 billion lower than forecast at that time, and $5 billion lower than the Budget 2012 forecast. We continued to borrow after 2012–13’s requirements were completed in order to take advantage of the historically low interest rate environment, and strong demand for Ontario’s bonds.
Of the $36.6 billion borrowed in 2012–13, $26.4 billion, or 72 per cent, was raised in Canadian dollars, which is slightly above the target laid out in the 2012 Budget. The remaining $10.2 billion, or 28 per cent, was issued in U.S. dollars. In a previous CEO’s corner, I mentioned that I couldn’t remember another year when we hadn’t borrowed in a third currency but my team, which has a better memory than I do, reminded me that it last happened in 2007–08, when we borrowed 86 per cent in Canadian dollars and 14 per cent in U.S. dollars.
As we have done over the previous three years, we were able to continue to extend the term of our debt. The average term of debt issued in 2012–13 was 12.4 years, which is close to the average over the previous two years, and much longer than the average of 8.1 years back in 2009–10.
I’d now like to move on to our borrowing plans for the 2013–14 fiscal year.
We’re planning to issue $33.4 billion in long-term public borrowing this year. This is $3.2 billion less than last year’s long-term public borrowing. More significantly, our total borrowing requirement is $7.2 billion lower than the forecast for 2013–14 that was contained in last year’s Budget. This is primarily due to lower deficits. The considerable reduction in long-term borrowing for 2013–14 amounts to $5.7 billion compared to the forecast contained in the 2012 Budget, while short-term borrowing has also been reduced by $1.5 billion, to reach the $7.2 billion total.
The strong demand I mentioned earlier allowed us to stay active in the markets in early April prior to when we entered our pre-budget blackout. We borrowed $1.6 billion of the 2013–14 borrowing requirement via two 30-year domestic issues, leaving $31.8 billion to be issued for the remainder of the year.
We plan to borrow at least 70 per cent in the Canadian dollar market in 2013–14, which is roughly in line with our traditional target, but represents a considerable decline in the reliance on foreign markets seen during the peak of the financial crisis.
Finally, I would like to speak briefly about debt. The Province’s net debt is projected to be $252.8 billion as of March 31, 2013, which is lower than the $259.8 billion forecast in the 2012 Budget.
The net debt-to-GDP ratio is projected to be 37.5 per cent at the end of fiscal 2012–13, compared to the 39.4 per cent forecast in the 2012 Budget. This ratio is expected to peak at 40.4 per cent in 2015–16, lower than the 41.3 per cent forecast in the 2012 Budget.
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