B.C. government’s land deals with First Nations threaten its ability to borrow money

The Eby government has been busy negotiating a series of agreements with First Nations, granting them Aboriginal title and/or co-governance over large swaths of land in British Columbia. While these deals have created economic uncertainty and sparked concerns about property rights in B.C., another potential consequence—the effect on the provincial government’s ability to finance debt—remains largely ignored.

To recap, in 2024 the B.C. government gave the Haida Nation Aboriginal title over Haida Gwaii, an archipelago off B.C.’s coast, where approximately half of the population is non-Haida. Consequently, the Haida—not the provincial government—now control the considerable off-shore natural gas reserves and on-shore mineral deposits on this land. The provincial government is also currently negotiating with the Tahltan Nation for almost 100,000 square kilometres, representing about 11 per cent of the entire province, including the “Golden Triangle,” a mineral-rich area with an estimated $1.3 trillion worth of minerals. And the government is negotiating with First Nations for prime land in Victoria.

Again, these agreements (and others in the works) raise real questions about the future flow of income for the provincial government from any economic activities on the land. If, for example, major mines are developed on formerly Crown land that’s been granted Aboriginal title, will the government still have exclusive rights to the mineral royalties or will they be shared or even exclusive to the First Nations on whose land the mines now reside? Such considerations could have profound effects on future government revenues and the ability of the government to borrow money.

Like any borrower, for the provincial government to borrow money there must be an investor willing to lend. The lending side has two groups—bond rating agencies and the actual lenders. Rating agencies analyze the sustainability of government debt to help lenders determine credit worthiness and the level of interest they should charge given the financial strength and creditworthiness of governments.

There are already worrying signs, with five downgrades of B.C.’s provincial debt by rating agencies in recent years. And there’s a real possibility that lenders will be increasingly reluctant—or potentially outright refuse—to provide debt financing to the B.C. government as its debt grows and the reality of bilateral agreements, related court cases and provincial legislation regarding Aboriginal title become clearer. This is not hyperbole. Lenders refused to provide financing to the governments of Nova Scotia and Saskatchewan in the 1990s and to Greece from 2009 to 2018. And in the early 1990s, lenders were increasingly worried about Ottawa’s debt level, causing marked increases in interest rates.

For the B.C. government (and thus, B.C. taxpayers), the financial risks linked with these agreements and court cases could result in marked increases in the interest payments lenders demand to compensate them for increased risks. Indeed, a one-percentage point increase in interest costs on the government’s existing debt would equal roughly an additional $1.9 billion this year alone. That means even more borrowing as the deficit increases.

And Victoria has racked up an almost unimaginable amount of debt in recent years, and the scale of the increase is unprecedented. Coming out of COVID in 2020/21, total provincial government debt stood at $87.1 billion and is expected to reach $183.4 billion this year (2026/27) and $234.6 billion by 2028/29, which is a total increase of 169.3 per cent in just eight years.

Meanwhile, the provincial government expects interest payments to total $6.4 billion this year, up from $2.7 billion in 2020/21, and reach $8.7 billion in 2028/29. That’s money unavailable for health care, education or to make fiscal room for tax relief.

The Eby government’s disastrous fiscal policies, coupled with its aggressive agenda for negotiating bilateral agreements with First Nations across the province, could seriously imperil provincial finances and the wellbeing of British Columbians.