March 14, 2018 / 2:17 PM / a year ago

Quebec govt says to cut debt by C$10 billion as election looms

MONTREAL, March 14 (Reuters) - Quebec plans to draw about C$10 billion ($7.72 billion) over the next five years from a specialized fund to tackle the Canadian province’s debt, Premier Philippe Couillard said on Wednesday in Quebec City.

Couillard’s Liberal government, which is lagging in polls ahead of October elections, said it would use the province’s Generations Fund, a trust fund set up to reduce public debt, to pay it down by C$2 billion a year, starting in 2018-2019.

“The effects of these repayments are important because they will permit new savings in interest paid on the debt by C$1 billion a year,” Couillard told reporters.

Despite the poll weakness, investors have warmed to Couillard’s Liberal government for delivering successive balanced budgets and investing in the Generations Fund, which has grown to C$13 billion from C$10.5 billion two years ago, said Laurentian Bank Chief Economist Sebastien Lavoie.

The plan, first reported by the French-language newspaper La Presse, comes as interest rates are on the rise. The Bank of Canada has hiked rates three times since July and has said it will be cautious in considering further moves.

Quebec has a debt-to-GDP ratio of about 52 percent and Couillard said that will fall to below 50 percent by next year. The province will present its next budget on March 27 ($1 = 1.2947 Canadian dollars) (Reporting By Allison Lampert in Montreal and Leah Schnurr in Ottawa)

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