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As the COVID-19 pandemic continues in Newfoundland and Labrador, the economic crisis that follows will push the province’s fiscal situation to its limit.
On March 20, Premier Dwight Ball wrote a letter to Prime Minister Justin Trudeau with a dire message: “Our province has run out of time.”
As reported by the CBC, Ball told Trudeau the attempts to borrow money to keep the province functioning were rejected, as of March 20.
“I must bring to your attention the immediate and urgent financial crisis that Newfoundland and Labrador is facing. To put it bluntly, our recent attempts to finalize our borrowing program, both short term and long term, have been unsuccessful,” Ball wrote.
“We have no other recourse to raise the necessary funds to maintain the operations of government, including our health-care system, especially at this critical time.”
Ball wrote that the state of emergency brought on by the January blizzard, on top of oil prices plummeting to below $20 per barrel, on top of the virtual shutdown of economic activity resulting from the COVID-19 pandemic, has pushed the province to the brink. With a global recession anticipated, Ball says, matters will only get worse.
"A global recession will lower demand for the province's key exports of fish, oil, newsprint and minerals, and will significantly impact production, employment and income levels in those industries. Oil prices have plummeted to historic lows and construction activity on Muskrat Falls and the Vale underground mine has been suspended. The fishery, which is the backbone of our rural employment, faces a very uncertain season," Ball wrote.
"The immediate impacts on air transportation, accommodations, food and beverage establishments, and recreation facilities as a result of social distancing measures being implemented are also unprecedented."
Ball said federal support is needed to get the province through the econonic crisis.
That support came from the Bank of Canada, on March 24, which announced the Provincial Money Market Purchase program, which saw the bank purchase treasury bills and short-term notes to support provincial borrowing efforts across the country.
But Ball says the fiscal situation remains dire.
“We are indeed in the position to make payroll and continue to provide services,” Ball said during Wednesday's COVID-19 provincial update.
“Essentially, we can make payroll and continue to provide services. We are in a health crisis, our priority is dealing with this pandemic. But coming out of this, we are entering into an economic crisis and we will need the support of the federal government.”
The reaction to the COVID-19 pandemic is being led by an all-party committee, allowing opposition parties an advisory role in the government’s response.
Progressive Conservative Leader Ches Crosbie and New Democratic Party Leader Alison Coffin both say they’re interested in extending the arrangement in some way to tackle the economic crisis facing the province.
Crosbie says the economic crisis is all-encompassing.
“It was probably inevitable given that it’s always been said that we have an expenditure problem, but not a revenue problem. Now we have a revenue problem and an expenditure problem. In fact, we have nothing but problems,” said Crosbie.
“It’s little wonder that financial markets may have lost confidence in us.”
Coffin says there’s no clear path out of the crisis for the province at this stage.
“The very way in which we conduct our daily lives has changed. The way money comes into provincial coffers has decreased substantially, the way we spend money is going to increase substantially,” she said.
“We have a huge, huge task ahead of us, trying to make our way through this.”