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Canada's provinces financially unstable over long-term, watchdog says

FILE PHOTO: King Street West is seen nearly empty a day before the Toronto Film Festival, held mainly online due to coronavirus disease (COVID-19) precautions, begins in Toronto, Ontario, Canada September 9, 2020. REUTERS/Carlos Osorio

OTTAWA (Reuters) - Fiscal policy in most of Canada’s provinces is not sustainable over the long-term, Canada’s budgetary watchdog said on Friday, even as the country’s overall financial position remains tenable for now.

The coronavirus pandemic, aging populaces and the associated rise in healthcare costs, along with low oil prices, will strain finances in Canada’s provinces and territories, Parliamentary Budget Officer Yves Giroux said in a statement.

“Most provinces face a financial situation that is unsustainable in the long term,” he said, adding: “Assuming that pandemic spending is temporary, current fiscal policy at the federal level is sustainable over the long term.”

Oil-rich Alberta and Saskatchewan are among the provinces seen at risk. While Canada’s federal government, along with populous Ontario and Quebec, have the fiscal flexibility to spend more or cut taxes, Giroux said.

Canada’s overall outlook - which includes the federal government, the provinces and the country’s pension plans - remains sustainable if no new permanent spending or extensions of pandemic measures are introduced, Giroux added.

Canada is spending more than C$200 million ($153.1 million)on pandemic aid and has pledged more support amid a second wave, but Finance Minister Chrystia Freeland warned last month there would be “no blank checks.”

Reporting by Julie Gordon in Ottawa; Editing by Chris Reese

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