The NWT's fiscal plan is guided by a Fiscal Responsibility Policy that includes guidelines with respect to the types of activities for which debt can be issued as well as limits on total debt and debt servicing costs to ensure affordability. "The Fiscal Responsibility Policy includes reporting and accountability mechanisms to ensure compliance and, as such, should help to ensure continued fiscal discipline," says Moody's Assistant Vice President Jennifer Wong, lead analyst for the NWT.

On a non-consolidated basis, the territory is estimated to have registered a deficit position of C$33.7 million (2.4% of revenues) in 2011-12. However, the territory's 2012-13 Budget projected that growth in federal transfers and taxation revenues will offset planned increases in expenses, resulting in an operating surplus of C$74.1 million (4.9% of revenues) in 2012-13. "By keeping expenditure growth close to the projected revenue growth, surpluses are projected to continue in the medium term. Given the territory's prudent policies, NWT's plan to return to operating surplus appears achievable," explains Ms. Wong.

The NWT, like the Canadian provinces, maintains substantial control over expenditure and revenue levers, although at present, resources revenues are controlled at the federal level. The territory, however, has signed a devolution agreement-in-principle with the federal government, and while negotiations are on-going, an agreement could mean a transfer of legislative authority over lands and resources to the NWT and potentially higher resource revenues and greater fiscal flexibility.

In recent years, deficits and an increase in capital expenditures have led to additions to NWT's net debt, which measured 22.6% of revenues at March 31, 2011. However, NWT's debt burden remains relatively low compared to the Canadian provinces, and is expected to remain relatively stable in the medium-term.

With an economy limited primarily to natural resources and associated industries, growth in real GDP has been volatile in NWT. In 2011, real GDP contracted by an estimated 5.8%, reflecting weak diamond production and a fall in capital investments. The territory projects growth to resume at 6.5% in 2012, as investments and exports recover strongly from 2011 levels.

The rating agency's report is a yearly update to the markets and does not constitute a rating action.

Jennifer A. WongAsst Vice President - Analyst Sub-Sovereign Group Moody'sCanada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635David Rubinoff MD - Sub-Sovereigns Sub-Sovereign Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Canada Inc.70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada(416) 214-1635(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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