The Bank of Canada has launched a new initiative to aid provinces struggling with the financial fallout of the COVID-19 pandemic.

The Provincial Bond Purchase Program will see the central bank buy up to $50 billion worth of provincial bonds.

"We're taking that initiative at this stage in order to make sure that those markets continue to perform, and that governments are able to tap them for the needs that they will have to get us across this difficult period," Bank of Canada governor Stephen Poloz said at a press conference in Ottawa on Wednesday.

Those bonds can be for the longer haul — with terms up to 10 years.

Last month, the Bank of Canada launched a separate program to shore up short-term borrowing needs for provinces.

Bank of Canada governor Stephen Poloz says the COVID-19 pandemic has hit Canada's economy hard. (Blair Gable/Reuters)

Resource-dependent Newfoundland and Labrador has been among the regions hardest hit by the twin body blows of cratering oil prices and a pandemic-related economic tsunami.

In March, Premier Dwight Ball wrote the prime minister to advise him the province was "out of time," and was having trouble borrowing cash to make payroll.

On Wednesday, Ball told reporters in St. John's the province had used the short-term Bank of Canada program, and will likely also avail of the new longer-term initiative as well.

"If indeed we need to go back to the market for extra borrowing, these new measures that have been put in place today are something that could help and support the province," said Ball.

"Of course, we will take advantage of those federal programs."

Newfoundland and Labrador is not alone. Other provinces have also been feeling the pinch.

In recent weeks, academics and economic think-tanks argued the federal government and the central bank may need to consider unprecedented options to save pandemic-ravaged provincial balance sheets.

On Wednesday, Poloz said the Bank of Canada launched the new program because of "significant strains" in provincial government bond markets.

It is expected to be operational by early May.

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