A scarcity of federal funding for the contentious Suburban Rail Loop could imperil Victoria's credit rating as a global agency casts doubt on its $34.5 billion price tag.
The Victorian government is staring at a $20 billion funding gap to build the eastern section of the line from Cheltenham to Box Hill.
It has committed $11.8 billion towards the project and is counting on the federal government to match but has only received a $2.2 billion commitment so far.
The other third of funding is expected to come from "value capture" revenue.
S&P Global Ratings analyst Anthony Walker said the ratings agency needed to see where the rest of money for the project was coming from.
"If there's a $9.6 billion funding gap because the commonwealth won't step in, there's going to be increased concerns on that credit rating," he told Melbourne radio 3AW on Tuesday.
"It could actually be downward pressure if they were to fund it themselves."
S&P is worried the eastern section of the project won't stick within its estimated budget of $30 billion to $34.5 billion.
"We've got concerns that that's undershooting," Mr Walker said.
"There's going to be some very difficult conversations to have over the next decade."
S&P downgraded Victoria's credit rating two notches in 2020 from AAA to AA, the lowest rating of any Australian state or territory.
Moody's stripped Victoria of its AAA status in February 2021 and downgraded its rating from AA1 to AA2 in 2022.
Credit rating downgrades make it more expensive for governments to service debt, leaving less money for hospitals, roads and schools.
The May state budget forecast the state's net debt would hit $187.8 billion by mid-2028, pushing up interest expenses to $9.4 billion annually.
Opposition Leader John Pesutto said S&P's public intervention was a shot across the bow for Jacinta Allan's Labor government and global investors.
"It would be a calamity if Victoria's credit rating were to be further downgraded," he told reporters.
With Treasurer Tim Pallas unavailable to field questions, Planning Minister Sonja Kilkenny sought to play down concerns of a looming downgrade.
She told reporters Mr Pallas outlined a strong fiscal strategy in 2020, with the latest budget projecting a reduction of net debt as a percentage of gross state product by mid-2028.
Mr Pallas met with S&P and Moody's during a recent two-week trip to the United States and Canada, declaring he didn't have to talk them out of another downgrade.
"Our assessment is we've still got breathing space but we have to be focused in terms of managing the situation," he said in July.
