Manitoba Premier Sees Deficit Narrowing Next Fiscal Year
(Bloomberg) -- Manitoba’s budget deficit will narrow by more than C$100 million ($75 million) next fiscal year, leaving room for Premier Brian Pallister to fulfill his pledge to eventually cut the provincial sales tax by a percentage point.
Manitoba will post a budget gap of less than C$400 million for the 2019-20 fiscal year, down from a forecast of a C$518 million deficit in the current fiscal year, Pallister said in an interview. The government has lowered spending growth through “efficiencies,” by reducing staff travel budgets, government vehicle costs and streamlining the tender contract process, he said.
“We have found a lot of waste, a lot of overlap, a lot of duplication that has allowed us to bend the cost curve," Pallister said in a Feb. 15 interview in his office at the provincial legislature in Winnipeg. He expects the March 7 budget will show his government is ahead of schedule on deficit reduction.
Manitoba has posted budget deficits since 2010 and Pallister’s Progressive Conservative Party has pledged to run a surplus by 2024. Pallister, 64, reiterated that the government is still on track to reduce the provincial sales tax to 7 percent from 8 percent in his first term, which ends in October 2020 unless he calls an early election. The cut would cost the province about C$300 million in lost revenue, but put more money into the pockets of Manitoba consumers, he said.
“We’re not going to solve it all by lowering a PST by one point, but at least somebody is trying to put a little bit more money on the kitchen table instead of taking it off," Pallister said. “Kitchen tables are under attack.”
The Manitoba government had forecast a budget deficit of C$518 million for the 2018-19 fiscal year, or C$3 million lower than its initial estimate in last spring’s budget, according to a fiscal update released in December. The province expects economic growth of 1.8 percent for 2019, in line with last year. Economists expect growth of 1.5 percent in 2020.
The improved finances may be helping bolster the province’s bonds. Manitoba’s C$1.45 billion of 3 percent debt due 2028 returned 2 percent this year, compared with 1.93 percent for bonds in the Bloomberg Barclays Canada Aggregate Government-Related index.
Manitoba’s credit rating was cut by S&P Global Ratings in 2016 and again in 2017 as it carries one of the highest relative debt loads among Canadian provinces. S&P rates the province A+, in line with Ontario, yet below Saskatchewan.
Pallister said the province still faces headwinds as he aims to meet his goal of a balanced budget. The Bank of Canada’s five interest rate hikes have pushed Manitoba’s annual debt service costs above C$1 billion for the first time, he said. The central Canada province has more than C$25 billion in debt.
“I don’t think we can take our foot off the pedal” in terms of curbing spending, he said. “We’ve started to turn the canoe to a safer shore, but now we have to paddle like crazy.”
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