April 12, 2011 / 8:15 PM / 6 years ago

Manitoba forecasts C$438 million budget deficit

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WINNIPEG, Manitoba (Reuters) - The Western Canadian province of Manitoba forecast on Tuesday a C$438 million ($456 million) deficit in its 2011-12 budget, its third straight, but said it will balance the books in three years.

Manitoba, whose economy depends in part on farming and mining, suspended its balanced-budget law three years ago when the global recession shrank its revenues. Most other Canadian provinces also fell into deficit.

"We're climbing successfully out of the downturn," Finance Minister Rosann Wowchuk said. "We are on schedule to return to surplus in 2014."

Manitoba forecasts spending at nearly C$14 billion in 2011-12, up about 2 percent, with more money going to health care, education and paying debt costs.

The province is budgeting revenue for 2011-12 at C$13.4 billion, up 2 percent from the last fiscal year, which ended March 31.

The left-leaning New Democratic Party has held power since 1999. Premier Greg Selinger replaced popular former premier Gary Doer in 2009 after Doer became Canada's ambassador to the United States.

Manitoba will hold a provincial election in October and the race is expected to be a tight battle between the New Democrats and the opposition Progressive Conservatives.

The province forecasts its debt will reach C$14.8 billion in 2011-12 from the current $13.2 billion.

The deficit in the just-completed 2010-11 fiscal year was C$467 million.

The NDP government projects successively smaller deficits over the next three years before Manitoba returns to surplus in 2014-15.

This year's budget includes C$65 million worth of cuts to taxes on income, property and small business. It draws nearly C$50 million from the province's rainy-day fund.

The budget adds an extra C$30 million to fight spring flooding, which is expected to be severe. The province did not estimate total flooding costs.

Manitoba expects a modest revenue boost from its oil and metals resources.

Manitoba's southwest corner is seeing a surge of oil well drilling. The government forecasts oil royalties to more than double to C$18.3 million this year.

($1=$0.96 Canadian)

Reporting by Rod Nickel; editing by Peter Galloway

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