2015 Ontario Budget
Chapter V: Borrowing and Debt Management

Introduction

Ontario conducts a robust and responsible borrowing program that protects the public interest. The government successfully completed its annual borrowing program in 2014–15, borrowing $39.8 billion. This is up from the $35.0 billion forecast in the 2014 Budget, as the Province capitalized on the continuing low interest rate environment and strong demand for Ontario bonds to prefund $4.8 billion of the 2015–16 requirement.

The Province’s interim total funding requirement in 2014–15 has decreased by $3.9 billion compared to the 2014 Budget forecast. Net debt as of March 31, 2015, is forecast to be $284.1 billion, $5.1 billion lower than forecast in the 2014 Budget, $6.0 billion lower than forecast in the 2013 Budget and $11.4 billion lower than forecast in the 2012 Budget.

Strong global investor demand for Canadian-dollar assets, the liquidity of Ontario benchmark bonds and continuing confidence in the Province allowed Ontario to borrow 79 per cent in Canadian dollars in 2014–15. This was well above the target of at least 70 per cent set out in the 2014 Budget. The Province completed 82 per cent of its borrowing in Canadian dollars in 2013–14 and 72 per cent in 2012–13.

Given the strength of demand in the Canadian-dollar market for Ontario bonds, the Province is raising its Canadian-dollar borrowing target to at least 75 per cent in 2015–16. This represents a continuing decline in the reliance on foreign markets that was seen during the financial crisis. At the peak of the crisis in 2009–10, only 49 per cent of the Province’s bond issues were in Canadian dollars.

Term of Borrowing

Given the low interest rates experienced in recent years, Ontario has been proactive in extending the term of its borrowing program. Extending the term to maturity allows the Province to lock in low interest rates for a longer period, which reduces refinancing risks and helps offset the impact of expected higher interest rates on the Province’s future interest on debt (IOD) costs.

Over the past five years, Ontario has issued $45.4 billion of bonds longer than 30 years to lock in low rates. As a result, the weighted-average term to maturity of long-term Provincial debt issued has been extended significantly.

2014–15 Borrowing Details and Green Bonds

Canadian-dollar borrowing was completed primarily through 33 syndicated issues, but also included floating rate notes, a bond auction, Ontario Savings Bonds and a $500 million Green Bond issue. Foreign currency borrowing was completed through several issues in U.S. dollars, euros and Australian dollars.

In the 2013 Ontario Economic Outlook and Fiscal Review, the Minister of Finance announced that Ontario intended to be the first province in Canada to issue Green Bonds.

On October 2, 2014, Ontario successfully launched a Green Bond program, with an inaugural global Canadian-dollar bond of $500 million. Ontario’s inaugural Green Bond was oversubscribed, with orders of $2.4 billion that far surpassed the size of the bond issue by $1.9 billion. Green investors in Canada as well as in the United States, Europe and Asia participated in the deal, bringing new international buyers to the Canadian-dollar market.

As the first Canadian province to issue Green Bonds, Ontario is leading the way to establish and develop a Canadian-dollar Green Bond market with investor participation from around the world.

Green Bonds will be an important tool to help Ontario finance transit and other environmentally friendly projects across the province. The Eglinton Crosstown Light Rail Transit (LRT) was selected as the first green project to receive funding through the initiative.

The Province plans to issue its second Green Bond during fiscal 2015–16.

Borrowing Program Results

TABLE 5.1 2014–15 Borrowing Program: Province and Ontario Electricity Financial Corporation
($ Billions)
  2014 Budget Interim In-Year Change
Deficit/(Surplus) 12.5 10.9 (1.6)
Investment in Capital Assets 10.2 9.5 (0.7)
Non-Cash Adjustments (4.5) (4.6) (0.1)
Loans to Infrastructure Ontario 1.8 0.8 (1.0)
Other Net Loans/Investments (0.5) (0.8) (0.3)
Debt Maturities 21.7 21.6 (0.1)
Debt Redemptions 0.3 0.1 (0.2)
Total Funding Requirement 41.5 37.6 (3.9)
Canada Pension Plan Borrowing
Decrease/(Increase) in Short-Term Borrowing (2.4) 2.4
Increase/(Decrease) in Cash and Cash Equivalents (1.4) 1.4
Preborrowing from 2013–14 (2.6) (2.6)
Preborrowing in 2014–15 4.8 4.8
Total Long-Term Public Borrowing 35.0 39.8 4.8
Note: Numbers may not add due to rounding.

The Province’s deficit for 2014–15 is now projected to be $10.9 billion — compared to the 2014 Budget forecast of $12.5 billion. The total funding requirement for 2014–15 is now forecast to be $3.9 billion lower than the 2014 Budget forecast.

The Province capitalized on the continuing low interest rate environment and strong demand for Ontario bonds to maintain short-term funding and cash levels, and prefund $4.8 billion of the 2015–16 requirement. As a result, total long-term public borrowing was $4.8 billion higher than forecast in the 2014 Budget in spite of the decline in the total funding requirement.

Borrowing Program Outlook

TABLE 5.2 Medium-Term Borrowing Outlook: Province and Ontario Electricity Financial Corporation
($ Billions)
  2015–16 2016–17 2017–18
Deficit/(Surplus) 8.5 4.8
Investment in Capital Assets 9.1 11.3 11.8
Non-Cash Adjustments (4.9) (5.5) (5.6)
Loans to Infrastructure Ontario 1.1 0.5 0.4
Other Net Loans/Investments 1.0 0.3 0.1
Debt Maturities 21.0 21.4 17.5
Debt Redemptions 0.2 0.2 0.2
Total Funding Requirement 35.9 33.0 24.4
Canada Pension Plan Borrowing (0.1)
Decrease/(Increase) in Short-Term Borrowing (2.5)
Increase/(Decrease) in Cash and Cash Equivalents
Preborrowing in 2014–15 (4.8)
Total Long-Term Public Borrowing 31.1 30.4 24.4
Note: Numbers may not add due to rounding.

The Province’s total long-term public borrowing in 2015–16 is forecast to be $31.1 billion, $8.7 billion lower than the amount borrowed in 2014–15, and $6.5 billion less than forecast for 2015–16 in the 2014 Budget.

The Province plans to borrow $85.9 billion over the three-year period in the medium-term borrowing outlook, down from the forecast $105.5 billion over the three-year period contained in the 2014 Budget. This $19.6 billion decline in borrowing reflects the impact of lower deficits, prefunding and the Province’s asset optimization activities.

Given the strength of demand Ontario has experienced in the Canadian-dollar market, the Province is raising its Canadian-dollar borrowing target to at least 75 per cent in 2015–16. This is an increase from the previous target of 70 per cent, which the Province has consistently exceeded over the past four years. The 75 per cent target is well within reach, as in 2014–15 Ontario borrowed $31.4 billion in Canadian dollars alone, larger than the total long-term public borrowing forecast of $31.1 billion for 2015–16.

In the past, Infrastructure Ontario (IO) borrowed from the markets to provide loans for infrastructure development to the broader public sector, including municipalities. From 2014–15 onwards, IO’s borrowing was undertaken directly by the Province through the Ontario Financing Authority. This centralization allowed borrowing to be conducted in a more cost-effective manner, resulting in overall interest savings. While the Province’s funding requirement increased to fund IO’s loans, net debt will not be affected as IO’s borrowing in the public markets was reduced by an identical amount.

The government will seek approval from the Legislature for borrowing authority to meet the Province’s requirement, and will propose amendments to streamline the administration of the Province’s borrowing program.

Interest on Debt Savings and Affordability

Interest on debt (IOD) expense is projected to be $10,675 million for 2014–15, which is $335 million lower than forecast in the 2014 Budget, reflecting lower-than-forecast interest rates, the lower forecast deficit for 2014–15, cost-effective debt management and a one-time gain from the sale of asset-backed commercial paper that was written down in prior fiscal years. This decline is projected to continue into 2015–16, with IOD expense forecast to be $11,410 million, $618 million lower than forecast in the 2014 Budget.

These savings continue a trend that has been in place since 2010, through a combination of lower deficits and borrowing requirements and lower-than-forecast interest rates. Chart 5.4 shows that IOD expense in 2015–16 is now forecast to be $4.0 billion lower than the forecast for 2015–16 contained in the 2010 Budget. Interest on debt savings over the period to balance now total $20.6 billion relative to the 2010 Budget forecast.

Chart 5.5 illustrates how the savings on IOD have lowered a key measure of the affordability of debt. The 2010 Budget forecast that, by 2015–16, the Province would have to spend 11.9 cents of every revenue dollar received on interest. The current forecast is 23 per cent lower, at only 9.2 cents of interest costs for every dollar of revenue. This ratio is lower than it was in the 14 fiscal years from 1992–93 to 2005–06, and is forecast to remain lower through the period to balance in 2017–18.

Ensuring Preferred Market Access

Ontario continues to have preferred access to the bond and money markets, both domestically and internationally. The Province uses a variety of tools to ensure that it will continue to have unhindered access to capital as needed, whether this is in receptive markets, such as in 2014–15, or in difficult conditions, such as in 2009–10.

In 2014–15, the Province was able to take advantage of a robust domestic market to complete 79 per cent of its long-term borrowing requirement through syndicated bonds, floating rate notes, a bond auction, Ontario Savings Bonds and a $500 million Green Bond issue. This ability to issue debt targeted at a variety of buyers allows the Province to borrow cost-effectively and have access to markets even during difficult conditions.

The Province has also been very successful in reopening existing syndicated bond issues and is able to accommodate investors demanding significant amounts of Ontario debt through its large order procedure. This allows the Province to raise cash cost-effectively over a short period.

While access remained particularly strong during 2014–15 in the Canadian-dollar market, where the Province has traditionally done most of its borrowing, the U.S.-dollar market continued to provide an excellent platform to complete nine per cent of the 2014–15 borrowing requirement. The Province regularly accesses the U.S.-dollar market, having borrowed $26.6 billion in U.S. dollars over the past four years. Ontario’s most recent U.S.-dollar issuance was a successful seven-year benchmark bond for $2.2 billion in September 2014, which attracted over 90 investors and had strong interest from investors in North America and Europe. Ontario’s U.S.-dollar bonds tend to be large benchmark issues that are actively traded and highly liquid.

The Province also returned to the euro market, issuing there for the first time since 2010. Ontario’s two new 10-year euro issues totalled $4.4 billion and were both oversubscribed. Given the success of these issues, the Province will likely return to the euro market in 2015–16.

The Province’s remaining foreign currency borrowing was completed in Australian dollars.

The Province continues to remain vigilant for cost-effective borrowing opportunities in other currencies. The purpose of borrowing in currencies other than Canadian dollars is to continue to diversify the Province’s investor base. This helps reduce Ontario’s overall borrowing costs and ensures that the Province will continue to have access to capital if market conditions become more challenging.

Ontario also works to strengthen its diverse investor base through its investor relations initiatives. It maintains strong working relationships with global investment dealers, issuers and other industry experts. In addition, the Province provides up-to-date investor information products and regular updates on the status of Ontario’s borrowing program through the Ontario Financing Authority’s website at www.ofina.on.ca.

This vigilance, combined with attention to international markets and investors, has been rewarded during times of challenging market conditions, such as in 2009–10 at the peak of the financial crisis, when borrowing in the domestic market was difficult. Ontario completed 51 per cent of its 2009–10 borrowing requirement of $43.8 billion in international markets through global issues in U.S. dollars, euros, Swiss francs and Hong Kong dollars. Overall, the Province maintains a diverse international investor base, having issued bonds in 10 currencies over the past decade and attracting investors from around the globe.

The Province will remain flexible in its borrowing approach by monitoring all major markets and seeking the most cost-effective means, over the long term, to finance Ontario’s borrowing program. This will include continuing to reach out to investors and investment banks, domestically and globally, to ensure that Ontario bond issues remain highly attractive, liquid and sought after, as they have been since Ontario began accessing public markets almost 25 years ago.

Ensuring Adequate Liquidity Levels

Ontario actively manages its financial obligations through the maintenance of a liquid reserve portfolio and the use of short-term borrowing. The Province has consistently maintained high levels of unrestricted liquid reserves since the financial crisis, averaging $23.5 billion for 2014–15, $24.9 billion for 2013–14 and $23.3 billion for 2012–13.

The Province’s short-term borrowing program in the Canadian- and U.S.-dollar money markets is relatively small, accounting for only seven per cent of Ontario’s debt. The unused short-term borrowing capacity that this leaves, combined with the high levels of unrestricted liquid reserves, ensures that the Province will always have adequate liquidity to meet its financial obligations.

Reducing Ontario’s Stranded Debt

Interim 2014–15 results for the Ontario Electricity Financial Corporation (OEFC) show an estimated excess of revenue over expense of $1.5 billion, reducing the OEFC’s unfunded liability (or “stranded debt of the electricity sector”) from $9.8 billion as of March 31, 2014, to $8.3 billion as of March 31, 2015. This is the eleventh consecutive year of stranded debt reduction.

As published in the 2014 Ontario Economic Outlook and Fiscal Review, the Minister of Finance determined the residual stranded debt to be $2.6 billion as of March 31, 2014. Under Ontario Regulation 89/12, the determination of residual stranded debt as of March 31, 2015, will be made by the Minister of Finance after the OEFC submits to the Minister its annual report, including the audited financial statements, and by no later than March 31, 2016.

The government dedicates revenues it receives from the electricity sector to OEFC. All OEFC revenues, including the debt retirement charge (DRC) paid by electricity users, are used to service and retire its debt and other obligations, as provided for under the Electricity Act, 1998.

As included in the 2014 Budget, the government is moving forward with removing the DRC cost from residential electricity users’ electricity bills, after December 31, 2015. This would save a typical residential user about $70 per year.

The charge will remain on all other electricity users’ bills until the residual stranded debt is retired — it is estimated this will occur by the end of 2018, as published in the 2014 Ontario Economic Outlook and Fiscal Review.

The estimated timing for residual stranded debt retirement is subject to uncertainty in forecasting future OEFC results and dedicated revenues to OEFC, which depend on the financial performance of Ontario Power Generation, Hydro One and municipal electricity utilities, as well as other factors such as interest rates and electricity consumption.

Impact of Proposed Hydro One Initial Public Offering on Residual Stranded Debt

The government recognizes its commitment to electricity ratepayers under section 50.3 of the Electricity Act, 1998, and is proposing steps to clarify and ensure that the benefits of selling shares in Hydro One are recognized by OEFC to contribute to the continuing reduction of its unfunded liability. Doing so would also help to offset impacts on residual stranded debt from a reduction in the projected present value of future dedicated revenues to OEFC related to Hydro One.

Following the completion of any share sales, the Minister of Finance would assess associated impacts as part of the annual determination of residual stranded debt and the estimated timing of its retirement.

Net Debt

Ontario’s net debt is the difference between total liabilities and total financial assets. It is projected to be $284.1 billion as of March 31, 2015 (March 31, 2014, $267.2 billion). This includes the broader public sector’s net debt of $15.3 billion (March 31, 2014, $14.1 billion). The net debt projection for March 31, 2015, is $5.1 billion below the forecast of $289.3 billion in the 2014 Budget. It is also lower than the forecast of $290.1 billion in the 2013 Budget and $295.5 billion in the 2012 Budget.

The Province’s net debt-to-GDP ratio is projected to be 39.4 per cent at the end of fiscal 2014–15, compared to 40.3 per cent forecast in the 2014 Budget, 40.2 per cent forecast in the 2013 Budget and 41.3 per cent forecast in the 2012 Budget. This ratio is expected to peak at 39.8 per cent in 2015–16, lower than the 40.8 per cent forecast in the 2014 Budget, the 40.4 per cent forecast in the 2013 Budget and the 41.3 per cent forecast in the 2012 Budget.

Ontario’s net debt-to-GDP and accumulated deficit-to-GDP ratios are levelling off and the government continues to maintain a target of reducing the net debt-to-GDP ratio to its pre-recession level of 27 per cent.

The difference between the net debt-to-GDP ratio and accumulated deficit-to-GDP ratio is due to the Province’s consistent level of investment in infrastructure as shown by the increase in tangible capital assets. By 2017–18, the net tangible capital assets of the Province are forecast to be approximately equal to the estimated program spending for that year.

Cost of Debt

The interest rate that Ontario pays on its debt has been in steady decline since 1990–91, when the effective interest rate (on a weighted-average basis) on total debt was 10.9 per cent. As of March 31, 2015, it is estimated to be 3.8 per cent, compared to 3.9 per cent on March 31, 2014, and 4.1 per cent on March 31, 2013.

The global decline in interest rates over the last 25 years cannot continue indefinitely. To protect itself from an increase in interest rates, the Province has continued to extend the term of its debt.

For 2015–16, the impact of a one percentage point change in interest rates on IOD is approximately $400 million for the Province.

Total Debt Composition

Total debt consists of bonds issued in the public capital markets, non-public debt, treasury bills and U.S. commercial paper. Total debt is projected to be $314.5 billion as of March 31, 2015, compared to $295.8 billion as of March 31, 2014, and a forecast of $310.5 billion in the 2014 Budget. The increase over the 2014 Budget forecast is primarily due to the $4.8 billion in prefunding for 2015–16 completed before March 31, 2015.

As of March 31, 2015, Canadian-dollar denominated debt represented 79 per cent of total debt outstanding.

Public debt, as of March 31, 2015, totalled $302.2 billion, primarily consisting of bonds issued in the domestic and international public markets in 10 currencies. Ontario also has $12.3 billion outstanding in non-public debt issued in Canadian dollars. Non-public debt consists of debt instruments issued mainly to the Canada Pension Plan Investment Board. This debt is not marketable and cannot be traded.

Limiting Risk Exposure

The Province continues to take a very prudent approach to managing the risks associated with its borrowing program. Liquid reserves averaged $23.5 billion in 2014–15, ensuring that the Province continues to have adequate liquidity to meet its financial obligations, even in the event of an unexpected and prolonged disruption in global capital markets. Ontario has also been proactive in extending the term of its borrowing to reduce refinancing risk and exposure to changes in interest rates. The average term of borrowing in 2014–15 was 14.1 years.

Ontario limits itself to a maximum net interest rate resetting exposure of 35 per cent of debt issued for Provincial purposes and a maximum foreign exchange exposure of five per cent of debt issued for Provincial purposes. As of February 27, 2015, the values for net interest rate resetting exposure and foreign exchange exposure were 10.3 per cent and 0.3 per cent, respectively. All exposures remained well below policy limits in 2014–15.

The Province’s Use of Derivatives

To seek the most cost-effective means of meeting its borrowing requirements, Ontario issues debt in foreign currencies, as well as floating rate debt in both domestic and international markets. To mitigate the risk arising from foreign exchange and interest rate movements, the Province uses derivatives, a type of financial contract, to limit its exposure to both of these variables. Foreign currency swaps and forwards are used to convert foreign currency exposure into Canadian-dollar exposure, while interest rate swaps ensure interest payments on the Province’s floating rate debt remain constant.

The Province’s consolidated derivative portfolio for 2014–15 (as of March 31, 2015) had a notional value of $195.9 billion (2014, $200.4 billion), which consisted of $110.6 billion (2014, $117.5 billion) in interest rate swaps, $53.0 billion (2014, $54.6 billion) in cross-currency swaps, $31.7 billion (2014, $27.7 billion) in forward foreign exchange contracts, and $0.5 billion (2014, $0.7 billion) in swaptions. Notional amounts represent the volume of outstanding derivative contracts and are not indicative of credit risk, market risk or actual cash flows.

New Standard on Financial Instruments

The Public Sector Accounting Board’s (PSAB) new standard on Financial Instruments, if implemented in its current form, would have a significant impact on how the Province uses derivatives to convert its current exposure in foreign currency debt into Canadian-dollar obligations. The proposed standard, which does not allow for hedge accounting, would introduce significant and difficult-to-forecast volatility in the accounting treatment of the Province’s IOD, net debt and deficit. This is contrary to the current PSAB standard, comparable international and U.S. accounting standards, and Canadian private-sector accounting standards, all of which allow for hedge accounting.

As of December 31, 2014, the Province used derivatives to hedge approximately 99 per cent of its $70 billion in foreign currency debt into Canadian dollars. While $52 billion of this hedging would remain unaffected under the new standards, IOD and the deficit would become subject to significant swings entirely due to the type of derivative used on the remaining $18 billion.

The derivative instruments used to hedge this $18 billion currently provide savings of up to 30 basis points, or over $50 million annually, relative to the cost of instruments that would otherwise have to be used under the new standard to eliminate volatility. However, the Province would no longer be able to continue to use these more economically efficient instruments to hedge its foreign currency exposure, as the volatility on its reported financial results would become too great. For example, in January 2015, the Canadian dollar depreciated by 11 cents against the U.S. dollar. Under the new standard, this would have resulted in a $1.2 billion accounting change in the Province’s IOD and deficit, even though, from an economic perspective, the foreign exchange risk would have remained hedged. As a result, accounting rules, rather than efficient business practices, would determine the Province’s use of derivatives for hedging, since the Province would be unable to accept such volatility in its financial statements.

Ontario, supported by the borrowing communities of the majority of the provinces, has communicated its outstanding concerns with the standard to PSAB. It has requested that PSAB consider hedge accounting as an option, in line with comparable international, U.S. and Canadian private-sector accounting standards. This approach would eliminate the potential accounting swings in IOD, the deficit and net debt. This would allow Ontario to continue to use the most economically efficient means of hedging its foreign exchange exposure and also ensure that the Province’s financial results reflect the economic substance underlying its use of derivative instruments.

Consolidated Financial Tables

TABLE 5.3 Net Debt and Accumulated Deficit
($ Millions)
  2010–11 2011–12 2012–13 2013–14 Interim
2014–15
Plan
2015–16
Debt1            
Publicly Held Debt            
Bonds2 201,074 223,468 245,544 259,933 279,948 290,133
Treasury Bills 13,925 11,925 13,024 12,297 13,288 13,288
U.S. Commercial Paper2 3,242 4,701 6,611 8,657 7,666 7,666
Infrastructure Ontario (IO)3 1,989 1,854 1,909 1,603 950 300
Other 353 347 360 345 309 300
Total 220,583 242,295 267,448 282,835 302,161 311,687
Non-Public Debt            
Canada Pension Plan Investment Fund 10,233 10,233 10,233 10,233 10,233 10,233
Ontario Immigrant Investor Corporation 1,063 1,185 1,108 1,139 927 661
55 School Board Trust 779 759 739 718 704 681
Public Service Pension Fund 1,403 1,048 656 225
Canada Mortgage and Housing Corporation 696 635 569 501 431 357
Ontario Public Service Employees' Union Pension Fund (OPSEU) 667 498 312 107
Ontario Teachers' Pension Fund 1,205 625
Total 16,046 14,983 13,617 12,923 12,295 11,932
Total Debt 236,629 257,278 281,065 295,758 314,456 323,619
Cash and Temporary Investments (22,416) (21,180) (29,037) (24,303) (26,582) (21,748)
Total Debt Net of Cash and Temporary Investments 214,213 236,098 252,028 271,455 287,874 301,871
Other Net (Assets)/Liabilities4 (13,261) (14,862) (13,839) (18,354) (19,085) (17,864)
Broader Public Sector (BPS) Net Debt 13,559 14,346 13,899 14,089 15,348 14,857
Net Debt 214,511 235,582 252,088 267,190 284,137 298,864
Non-Financial Assets5 (69,938) (77,172) (84,956) (90,556) (97,801) (104,016)
Accumulated Deficit 144,573 158,410 167,132 176,634 186,336 194,848
1 Includes debt issued by the Province and Government Organizations, including the OEFC.
2 All balances are expressed in Canadian dollars. The balances above reflect the effect of related derivative contracts.
3 Infrastructure Ontario's (IO) interim 2014–15 debt is composed of Infrastructure Renewal Bonds ($950 million). IO's debt is not guaranteed by the Province.
4 Other Net (Assets)/Liabilities include accounts receivable, loans receivable, advances and investments in government business enterprises, accounts payable, accrued liabilities, deferred revenue and capital contributions, pensions and other employee future benefits, and other liabilities.
5 Non-financial assets include the tangible capital assets of the Province and broader public sector.
Source: Ontario Ministry of Finance.
TABLE 5.4 Medium-Term Outlook: Net Debt and Accumulated Deficit
($ Billions)
  2016–17 2017–18
Total Debt 334.8 341.4
Cash and Temporary Investments (21.7) (21.7)
Total Debt Net of Cash and Temporary Investments 313.1 319.7
Other Net (Assets)/Liabilities (15.9) (13.8)
Broader Public Sector (BPS) Net Debt 14.3 13.7
Net Debt 311.5 319.5
Non-Financial Assets (111.8) (119.8)
Accumulated Deficit 199.7 199.7
Note: Numbers may not add due to rounding.
TABLE 5.5 Debt Maturity Schedule
($ Millions)
Currency
  Canadian
Dollar
U.S.
Dollar
Japanese
Yen
Euro Other
Currencies1
Interim
2014–15
Total
2013–14
Total
Fiscal Year Payable 
Year 1 21,769 18,275 916 1,806 42,766 43,324
Year 2 11,188 9,887 494 21,569 21,397
Year 3 12,243 5,011 385 17,639 21,485
Year 4 11,402 5,233 75 594 17,304 17,521
Year 5 15,327 3,853 4,747 532 24,459 16,004
1–5 years 71,929 42,259 991 5,132 3,426 123,737 119,731
6–10 years 65,010 6,774 386 6,365 1,382 79,917 74,080
11–15 years 19,368 121 19,489 20,548
16–20 years 10,196 10,196 9,513
21–25 years 34,653 34,653 22,769
26–50 years2 46,464 46,464 49,117
Total3 247,620 49,033 1,377 11,497 4,929 314,456 295,758
Debt Issued for Provincial Purposes 223,559 48,664 1,377 11,318 4,195 289,113 269,612
OEFC Debt 24,061 369 179 734 25,343 26,146
Total 247,620 49,033 1,377 11,497 4,929 314,456 295,758
1 Other currencies include Australian dollar, New Zealand dollar, Norwegian kroner, Swiss franc, Hong Kong dollar and South African rand.
2 The longest term to maturity is to June 2, 2062.
3 The foreign currency denominated debt for Interim 2014–15 is $66.8 billion (2013–14, $67.8 billion). Of that, $65.9 billion or 98.6 per cent (2013–14, $66.4 billion or 98.0 per cent) was fully hedged to Canadian dollars.

Chart Descriptions

Chart 5.1: Weighted-Average Term of Borrowing in Years

The weighted average term of borrowing for 2014–15 was 14.1 years. The average term to maturity of new long-term Provincial borrowing has been extended significantly from 8.6 years in 2008–09.

Return to Chart 5.1

Chart 5.2: 2014–15 Borrowing

The Province’s 2014–15 borrowing program totalled $39.8 billion, and consisted of $27.6 billion of Canadian dollar syndicated bonds, $1.9 billion of Canadian dollar floating rate notes, $0.8 billion of Canadian dollar bond auctions, $0.6 billion of Ontario Savings Bonds, $3.6 billion of U.S. dollar bonds, $4.4 billion of Euro bonds, $0.5 billion of Australian dollar bonds and a $500 million Green Bond issue.

Return to Chart 5.2

Chart 5.3: Total Long-Term Public Borrowing Forecasts

The total Long-Term Public Borrowing forecast in the 2014 Budget for 2014–15 to 2016–17 totalled $105.5 billion. The total Long-Term Public Borrowing forecast in the 2015 Budget for 2015–16 to 2017–18 totalled $85.9 billion. The difference between the two forecasts is $19.6 billion.

Return to Chart 5.3

Chart 5.4: Interest on Debt: Budget Forecast versus Actual

Interest on debt expense in 2015–16 is now forecast to be $4.0 billion lower than the forecast for 2015–16 contained in the 2010 Budget. Interest on debt savings over the period to balance now total $20.6 billion below the 2010 Budget forecast.

Return to Chart 5.4

Chart 5.5: Interest on Debt-to-Revenue Ratio

Interest on debt-to-revenue is forecast to be 9.2 per cent for 2015–16. This ratio is lower than it was in the 14 fiscal years from 1992–93 to 2005–06 and is forecast to remain lower through the period to balance in 2017–18.

Return to Chart 5.5

Chart 5.6: Canadian Dollar and Foreign Currency Borrowing

The Province’s 2014–15 borrowing program totalled $39.8 billion; $31.4 billion was borrowed in the Canadian dollar market and $8.4 billion was borrowed in foreign currencies.

Return to Chart 5.6

Chart 5.7: Average Unrestricted Liquid Reserve Levels

The average unrestricted liquid reserve for 2014–15 was $23.5 billion. The average unrestricted liquid reserve level has been steadily increasing from $8.3 billion in 2008–09.

Return to Chart 5.7

Chart 5.8: Residual Stranded Debt since April 1, 1999

As of March 31, 2014, as determined by the Minister of Finance, the residual stranded debt was $2.6 billion, a decrease of $1.3 billion compared to residual stranded debt of $3.9 billion as of March 31, 2013. This is also a total estimated decrease of $9.3 billion from an estimated peak of residual stranded debt of $11.9 billion as of March 31, 2004.

Return to Chart 5.8

Chart 5.9: Net Debt-to-GDP and Accumulated Deficit-to-GDP

Net debt-to-GDP ratio is projected to be 39.4 per cent as of March 31, 2015. The net debt-to-GDP is projected to peak at 39.8 per cent in 2015–16. The accumulated deficit-to-GDP is projected to be 25.8 per cent as of March 31, 2015.

Return to Chart 5.9

Chart 5.10: Effective Interest Rate (Weighted Average) on Total Debt

As of March 31, 2015, the interim effective interest rate (calculated as a weighted average) is 3.8 per cent on the Province’s total debt. This compares with 3.9 per cent in 2013–14 and 4.1 per cent in 2012–13. The effective interest rate has been steadily decreasing from 10.9 per cent in 1990–91.

Return to Chart 5.10

Chart 5.11: Total Debt Composition

As of March 31, 2015, the Province’s total debt was $314.5 billion, and consisted of $222.0 billion of Canadian dollar public bonds, $12.3 billion of Canadian dollar non-public debt, $13.3 billion of treasury bills, $7.7 billion of U.S. dollar commercial paper, and $59.2 billion of foreign currency bonds.

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Chart 5.12: Net Interest Rate Resetting and Foreign Exchange Exposure (As a Percentage of Debt Issued for Provincial Purposes)

The Province’s interim net interest rate resetting exposure, calculated as a percentage of the debt issued for Provincial purposes, was 10.3 per cent on February 27, 2015. This compares to 11.0 per cent as of March 31, 2014, and 8.9 per cent as of March 31, 2013. The interest rate exposure limit is set at 35 per cent. The Province’s interim foreign exchange exposure, calculated as a percentage of the debt issued for Provincial purposes, was 0.3 per cent as of February 27, 2015. This compares to 0.4 per cent as of March 31, 2014, and 0.8 per cent as at March 31, 2013. The foreign exchange exposure limit is set at 5 per cent.

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