Volume I - Finance - Government of Newfoundland and Labrador

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24 UNDERSTANDING THE FINANCIAL HEALTH OF THE PROVINCE OF NEWFOUNDLAND AND LABRADOR Sustainability Sustainability refers to the degree to which a government can meet its existing program commitments and creditor requirements without increasing the debt burden on the economy. Indicators of sustainability include: a) Net Debt as a Percentage of GDP • This ratio measures the level of debt that the Province carries as a percentage of its GDP. • As presented in the following graph, there has been a steady decline in net debt as a percentage of GDP from 2006 to 2009 with an increase in 2010. The increase in the current year resulted from the increase in net debt in addition to the economic downturn resulting in a decline in GDP. On a five year basis, the relationship implies that the rate of decline in net debt has been greater than the rate of economic growth. As this ratio decreases, it indicates that Government has increased ability to manoeuver when making fiscal choices. • The average of this ratio over the past five years is 39.0%. Since 2006, it has experienced a significant decrease of approximately 20.3%. 75 60 53.2 47.9 Percentage 45 30 36.0 25.2 32.9 15 0 2006 2007 2008 2009 2010 b) Annual Surplus (Deficit) as a Percentage of GDP • This ratio measures the difference between revenues and expenses expressed as a percentage of GDP. • As indicated in the following graph, the annual surplus (deficit) as a percentage of GDP moved to a deficit as a percentage of GDP of (0.1%) in 2010 after significant increases from 2006 to 2009 to a surplus of 7.4%. The average of this ratio over the past five years is 2.8%. The current decline suggests that the Province’s ability to meet its financial obligations has decreased.
UNDERSTANDING THE FINANCIAL HEALTH OF THE PROVINCE OF NEWFOUNDLAND AND LABRADOR 25 8 7.4 6 5.0 Percentage 4 2 0.9 0.6 0 (0.1) -2 2006 2007 2008 2009 2010 Vulnerability Vulnerability refers to the degree to which a government is dependent on, and therefore vulnerable to, sources of funding outside of its control or influence. Indicators of vulnerability include: a) Foreign Currency Debt as a Percentage of Net Borrowings • This ratio measures the Province’s foreign currency debt relative to its net borrowings. It reflects the degree of vulnerability to which the Province is subject in relation to foreign currency swings. • As indicated in the following graph, after an increase in 2009 to a percentage comparable to 2006, foreign currency debt as a percentage of net borrowings has decreased to 13.2% in 2010. The decrease in the current year occurred due to declines in both foreign currency debt and net borrowings with a greater rate of decline in foreign currency debt than in net borrowings. This decrease illustrates that the Province is less vulnerable to changes in foreign currency exchange rates than in the previous years. • The average of this ratio over the past five years is 14.3%. While foreign currency debt has historically represented a significant portion of net borrowings, this ratio has declined to slightly below the average to 13.2%.
Page 1 and 2: Province of Newfoundland and Labrad
Page 5 and 6: i Table of Contents Page No. INTROD
Page 7 and 8: 1 INTRODUCTION Volume I of the Publ
Page 9 and 10: UNDERSTANDING THE FINANCIAL HEALTH
Page 29: UNDERSTANDING THE FINANCIAL HEALTH
Page 37 and 38: Government of Newfoundland and Labr
Page 39 and 40: OFFICE OF THE AUDITOR GENERAL St. J
Page 41 and 42: SUMMARY FINANCIAL STATEMENTS PROVIN
Page 47 and 48: SUMMARY FINANCIAL STATEMENTS 41 NOT
Page 61 and 62: SUMMARY FINANCIAL STATEMENTS 55 LOA
Page 71 and 72: SUMMARY FINANCIAL STATEMENTS 65 TAN
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SUMMARY FINANCIAL STATEMENTS 75 GOV
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Volume I - Finance - Government of Newfoundland and Labrador

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