Declining oil revenues and costs associated with the COVID-19 pandemic has Newfoundland and Labrador projecting a $2.1-billion budget deficit, an increase of 180% from last year's provincial budget.
The increased budget deficit was presented in a fiscal update delivered by Finance Minister Tom Osborne, ahead of a full budget that is expected in September.
The finance minister said expenses for the fiscal year will rise by $720 million, including an increase of $261 million in healthcare costs, $90 million of which is related to the pandemic.
A $200-million contingency fund that was approved by the Newfoundland government in March has also contributed to rising expenses, with $118 million already spent.
Offshore oil revenue, which is vital to the province's revenue, is projected to decrease by $631 million, mainly due to a $560 million drop in royalty payments.
Revenues for the 2019-20 fiscal year came in $225 million less than previously recorded due to new accounting from provincial energy corporation Nalcor Energy related to its stake in two offshore oil projects. As a result, the Newfoundland government said borrowing projections for the year have increased from $2 billion to $3.2 billion.
The revised update also projects a rise in the province's net debt from $14.6 billion to $16.7 billion, a development that Finance Minister Osborne called a "major concern."
Osborne did not say whether austerity measures would be necessary to help control ballooning costs, noting that a new premier will set priorities once the governing provincial Liberals choose their next leader on August 3 after current Newfoundland Premier Dwight Ball steps down.
Osborne said help from the federal government in Ottawa will be key in assisting any economic recovery. He said a "pan-Canadian solution" to Newfoundland’s fiscal problems is needed.
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