Provincial governments in Canada have shared their budgets for the upcoming year, and just two—Alberta and New Brunswick—have balanced budget projections. Just two years ago, when a strong economy and higher commodity prices, eight of the 10 provinces reported a surplus.
The total provincial budget deficit is on its way to reach $27.9 billion this year, compared with $10.6 billion last year, while total net debt is forecast to increased by more than $65 billion—more than double the underlying budget deficit, according to a report from BMO Capital Markets. Total borrowing could top $130 billion, which would be the largest amount on record, with the exception of the first year of the pandemic.
“The provinces are still in good fiscal shape, but the lustre and steady positive momentum is wearing off,” the BMO report said.
Most governments are facing higher public sector wages and interest costs, and population growth—which is straining infrastructure—is driving up capital spending. “Across the board, budgeted deficits appear to be largely driven by substantial spending needs, particularly in health care, education and transportation,” said Aditi Joshi, vice-president of global sovereign ratings at credit rating agency Morningstar DBRS.
