Provinces run up their deficits

This budget season, provinces are primed to rack up more debt than us during the holidays.

Driving the news: As the 2024-25 provincial budgets roll in, new research from the National Bank of Canada estimates that provinces facing deficits will be $130 billion in debt this fiscal year. That’s a 21.5% surge from the year before and, excluding 2020, the highest tally in at least a decade.

  • Both Québec and B.C. project record-high deficits for the year ($11 billion and $7.9 billion, respectively) as they kick the goal of a balanced budget down the road.

  • Of the eight provinces that have reported budgets so far, just two project surpluses: Alberta (its fourth straight, at $367 million) and New Brunswick (its seventh straight, at $41 million).

Why it matters: Provinces are prioritizing spending over balanced books, feeling the need to splash cash to tackle persistent issues — namely housing, affordability, and healthcare. Big spending aims to bring relief to struggling citizens while also supporting GDP growth.

Yes, but: As anyone with debt knows, the more it builds up the harder it is to pay off. Big deficits make the ultimate goal of balanced budgets harder to achieve and can offset any of the potential gains seen by economic growth if expenditures start to outpace revenues. 

  • Ballooning deficits can also damage a province’s fiscal reputation and future ability to borrow. For example, some experts fear B.C. is at risk of a credit rating downgrade

Zoom out: Newfoundland’s budget was controversial for a reason besides debt: fishing laws. The province delayed its budget reading by a day after fishers stormed the legislature, demanding the province change restrictive fish selling and processing laws.—QH