Public Accounts Committee on Nov. 22nd, 2022

[Han Dong, Liberal, Don Valley North, ON]

Would you say that given the fact that we just weathered a major pandemic, including all the relief packages, that we're in a very healthy state compared to the last time we had a major crisis, that being the recession in 2008-2009?

[Michael Sabia]

My answer to that, Chair, is yes. The issues about debt-to-GDP ratio and deficit-to-GDP ratio are are ultimately relative issues about how we stack up against other countries in the world, because really that's what's relevant here. It's not an absolute issue; it's a relative issue.

In both debt-to-GDP and deficit-to-GDP ratios, within the G7 we are number one. We are in the strongest fiscal position of any country in the G7. Even in the G20, a much larger group, I think on a debt-to-GDP basis we're third or fourth, and on a deficit-to-GDP basis we're about third as well.

Really, no matter how you look at it, whether it's large industrialized countries in the G7 or a broader group in the G20, we are among the strongest in the world.

[Han Dong, Liberal, Don Valley North, ON]

Does the health of the debt-to-GDP ratio stacking up against our allied countries have anything to do with our credit rating?

[Michael Sabia]

Yes, absolutely. Credit ratings are done on a government by government basis, a level of government basis. As you know, Canada is among one of 10 AAA-rated countries in the world. That rating is based on the strength of our debt-to-GDP and our deficit-to-GDP ratios, and our overall strength as well, because it's not just those numbers but rather the overall fiscal credibility of the Government of Canada that plays in a significant way into the AAA rating that the country has.

[Han Dong, Liberal, Don Valley North, ON]

Did you notice—

[The Chair, Conservative, John Williamson]

Mr. Dong, I'm afraid that is the time.

We turn now to Mr. Genuis. You have the floor for five minutes. Go ahead, please.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you very much, Mr. Chair.

I want to start with a follow-up to my previous question.

I raised an issue. I was told, that it was a case of an error in the public accounts. I'm glad I identified it, but you responded right away, so you were clearly aware of that error. How many other errors are there in this document that you're aware of?

[Roch Huppé]

In our preparation time to come to this committee, that error was one that we kind of fell on ourselves. I don't know offhand of any other right now. It doesn't mean there's not a typo here and there, but there's nothing that I'm aware of right now.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Are you saying that the one question I asked identified the only error in these documents, and that there are no other errors in them?

[Diane Peressini, Executive Director, Government Accounting Policy and Reporting, Treasury Board Secretariat]

“Act” is spelled wrong on the previous page, where it should say “Bankruptcy and Insolvency Act”.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

That's fine, but I'm interested in incorrect numbers.

So that's the only case?

[Roch Huppé]

Yes. None has been identified.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

None has been identified. Okay. I identified the only error that's been identified. Okay.

[Diane Peressini]

Yes. Generally what happens is that there often are errata, and they are published after the publication of public accounts. There is a process by which we will advise you of any that are identified in advance of this meeting. It's generally departments or our office that will stumble across something in going through stuff and realize it.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay. Thank you.

I want to ask about the Asian Infrastructure Investment Bank. This is on page 306 of volume I.

As a matter of policy, our party opposes Canadian participation in the Asian Infrastructure Investment Bank. We shouldn't be funding developing assistance through a Chinese state-controlled development bank. There are many better ways of delivering those resources.

In terms of the spending, I note that it says here, “The total value of shares is $995.4 million USD”, so it's well over a billion dollars Canadian, most of which is not paid in but rather is callable.

Does this mean the bank can at any time call for the remaining 80% of that capital, meaning hundreds of millions of additional dollars, up to a billion U.S. dollars? What are the conditions under which those shares could be called?

Mr. Sabia, are you the right person to answer this?

[Michael Sabia]

As you rightly say, the paid-in capital there is only a relatively small fraction of the overall commitment. Sometimes the manner in which these multilateral development banks can call on additional capital that has been pledged varies across some of the banks. I would want to double-check on whether or not this one is purely callable at the direction of management or of the board of the Asian Infrastructure Investment Bank before I gave you an answer to that. We can come back to you and give you a specific answer on that one.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay. Thank you.

This so-called development bank is effectively Chinese state-controlled, so the mechanisms—

[Michael Sabia]

We would not agree with that.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

—by which the Chinese state could, through this development, “call” for Canadian capital are a matter of significant concern to me and probably to other members and to the public. We do look forward to that follow-up.

Just to say that the relative—

[Michael Sabia]

But I would reiterate that it's not a Chinese-controlled investment bank—

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Sabia, I'll give you a chance to respond.

Your minister is a governor on this bank. What you called “relatively small” amounts of money were, I think, about $160 million U.S., so that is well under half of the total callable. That's true.

If the Asian Infrastructure Investment Bank were to try to call hundreds of millions of dollars in additional capital from Canada, would Canada be obliged to provide that capital at that point, or is there a mechanism by which we could refuse to provide that capital?

[Michael Sabia]

I think I just answered that question by saying that we need to check. The rules vary across institutions. I would just need to check to make sure I gave you the absolutely correct answer to that question.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay. The follow-up information I'm looking for is, one, the mechanism by which this capital could be called; and two, whether Canada would have the discretion to say no if that mechanism were used by the bank to call it.

Is Canada able to pull out of this? Would we be able to get our money back if, hypothetically, a new government came in and didn't want anything to do with this vehicle?

[Michael Sabia]

The participation of the Government of Canada in the bank is always subject to the control of the Government of Canada.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Okay. How much money would we get back if we pulled out, though? Would we get it all back?