Credit Agency Analysis Suggests Nova Scotia’s True Fiscal Pressure May Be Larger Than the Headline Deficit
Credit-rating agency Morningstar DBRS says Nova Scotia’s latest budget reflects rising fiscal pressure, with debt growth and capital spending pushing overall financial exposure beyond the headline deficit figure.
Morningstar DBRS says Nova Scotia’s 2026–27 budget continues large multiyear investments in healthcare, housing, and infrastructure, but warns that deficits are deeper than previously expected and debt levels are rising. While the Province projects an operating deficit of about $1.2 billion, Morningstar DBRS indicates that on its adjusted basis — which includes capital spending and accounting factors — the shortfall is closer to $3.9 billion, potentially the widest among Canadian provinces this budget season.
The report notes that revenues are expected to grow through stronger provincial tax revenues and federal transfers, but expenses continue to increase across health care, education, social programs, and public works. Debt-servicing costs are also projected to rise due to higher borrowing needs and interest rates.
Budget 2026–27 introduces a Fiscal Stability Plan aimed at slowing spending growth and aligning it more closely with revenue growth, including a planned reduction in public service size over time. However, Morningstar DBRS notes there is no clear plan to return to balance, and larger deficits are expected to persist longer than previously anticipated.
The agency highlights that Nova Scotia’s capital plan — the largest in the province’s history — combined with operating deficits, is expected to push debt levels higher. Net debt-to-GDP is projected to rise toward the mid-40% range by 2029–30, reducing fiscal flexibility and limiting the Province’s ability to respond to future economic shocks.
Morningstar DBRS adds that Nova Scotia’s economy has shown resilience in recent years, supported by strong construction activity and population growth, but slower growth and trade uncertainty could weigh on the outlook going forward.
Source: Morningstar DBRS – Nova Scotia’s 2026–27 Budget: Deficits Deepen as Capital Spending Accelerates (February 25, 2026).
Click here to download the report.