ALBERTA PROVINCE

Southland Times, Issue 23377, 8 December 1937, Page 3

ALBERTA PROVINCE

POLICY OF DEFAULT ON OBLIGATIONS

The default and arbitary reduction of interest on its obligations by the Canadian Province of Alberta was in part the result of a definite policy of the Aberhart Administration, rather than necessity, according to the Institute of International Finance, in a bulletin on Alberta issued recently, says The New York Times. “For some years before 1936 Alberta, along with Manitoba, Saskatchewan, and British Columbia, had been forced to borrow heavily from the Dominion for ordinary budget purposes as well as for relief expenditures,” the report says. “In the election of August 1935, control of the Government was obtained by the Social Credit Party, headed by William A. A. Aberhart, whose financial programme included the cessation of borrowing. In order to make the incurrence of additional debt unnecessary, the Government determined to reduce expenditures by forcing a reduction in interest charges on the public debt. _ “After the announcement of this policy the Provincial Government applied to the Dominion for aid in meeting the April 1, 1936, maturity, which, in view of the unorthodox financial policy of the province, was refused, and the default followed. Since that time two other issues have matured, both of which were defaulted, and, in addition, the Legislative Assembly has by formal action reduced the interest on all direct and on all except one guaranteed issue of the province by about 50 per cent.”

The interest-reduction legislation was declared unconstitutional by the Alberta Supreme Court on February 23, 1937, but, the Institute says, “the province has continued to offer only the reduced payments in satisfaction of maturing coupons.” The Institute declared that the financial condition of the Alberta Government is serious and cites reports of the Bank of Canada and the Alberta Bondholders Protective Committee as substantiating this contention. The bank, in a report issued early this year, concluded that, “if Alberta were now paying full interest on its obligations, the province in 1937-38 would presumably have to borrow its full share of unemployment relief from the Dominion. and on the basis of budgetary estimates (not including debt retirement) would have a cash shortage of about 600,000 dollars (£120,000).”