Canada's Manitoba sees unexpected budget deficit

Tue Dec 22, 2009 4:21pm EST
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - A slight surplus has turned into deficit for Canada's western province of Manitoba, which has racked up unexpected expenses from fighting the H1N1 flu and spring flooding while seeing revenue fall.

Manitoba projects a deficit of C$592 million (US$558 million) after budgeting last March for a thin C$48 million surplus, the government said in a financial report on Tuesday.

The province has a law requiring balanced budgets, however a one-year deficit is allowed as long as Manitoba doesn't average a deficit over four years. Including this year's deficit, Manitoba would come out C$221 million in surplus for the four-year period.

The deficit does not change Manitoba's borrowing needs, said Hugh Eliasson, deputy minister of finance.

Manitoba has seen its revenue dip and profits from the government-owned Manitoba Hydro utility fall, while it spent C$150 million on fighting the flu and last spring's flooding.

Finance Minister Rosann Wowchuk said Manitoba is outperforming the rest of the country when considering that Manitoba's deficit represents only 1.2 percent of its C$50 billion gross domestic product. The government also projected Manitoba's economy to shrink by 0.2 percent in 2009, the smallest contraction of all Canadian provinces.

Premier Greg Selinger, who represents the left-leaning New Democratic Party, took office in October after the departure of Gary Doer, who served for 10 years. Selinger said at the time that he hoped to post a surplus, even if it meant dipping into reserve funds.

($1=$1.06 Canadian)