Interest rate hikes having less effect on Sask. government debt

While steadily rising interest rates are playing havoc with some people’s mortgage and car payments, the Saskatchewan government isn’t having as much of a problem.

On Wednesday, the Bank of Canada announced it’s keeping its trend-setting interest rate at five per cent, though that’s still higher than it has been in more than a decade.

In just the past year, the rate has been increased by 2.5 per cent.

However, the Government of Saskatchewan isn’t seeing as much of an impact on its $30.9 billion in gross debt.

According to the Ministry of Finance, the majority of the provincial government’s debt is long term, with terms of up to 40 years in some cases. The ministry said Bank of Canada increases don’t have as much impact on those rates – rising about 0.5 per cent in the past year to 4.5 per cent now on new 10-year or 30-year debentures.

In the current fiscal year, the province plans to take about $1.3 billion in new term debt for the Saskatchewan Capital Plan and Crowns, and the new rate will add about $7 million in yearly interest.

Short-term interest rates have followed the Bank of Canada’s rate increases and have added about $38 million to the province’s costs on short-term debt. The ministry said all of that is related to the province’s Crown corporations.

The province is working to pay down its debt, putting in $1.5 billion last fiscal year and planning to put in another $1 billion this year. The province says those two payments will save $110 million annually in interest payments.