QUEBEC CITY, Quebec (Reuters) - The Canadian province of Quebec said on Thursday it will balance its books in 2015-16 following six consecutive years of deficits and vowed to continue to control government spending in the years ahead.
Quebec Finance Minister Carlos Leitao reiterated his forecast for a deficit of C$2.35 billion ($1.88 billion) in fiscal year 2014-15, ending March 31, unchanged from projections in his fiscal update last December.
In last April’s provincial election, the governing Liberals had pledged to balance the budget once in power. The budget was Leitao’s second since the Liberals took over from the separatist Parti Quebecois following the election.
Quebec, the second-biggest provincial economy in Canada, has one of the highest public debt loads of any province.
Leitao said the coming year’s budget will be the first of five balanced budgets through 2020, as the predominantly French-speaking province continues to consolidate government services, while gradually introducing tax breaks for individuals and companies.
Leitao said his projections for future balanced budgets are credible even as the government faces headwinds from imminent negotiations with its large unionized sector.
“In my opinion, the five-year projections are very reasonable, very prudent, very conservative,” Leitao, a former bank economist, told reporters.
In 2015-16, government spending on programs will increase by an anemic 1.2 percent, while revenues are forecast to grow by 4.4 percent.
For investors, the budget signals a turnaround, said Sebastien Lavoie, assistant chief economist at Laurentian Bank Securities.
“The main message is that they have been trying to retake control of public finances and now they want to keep it that way,” he said.
The province’s debt-to-GDP ratio will decline from a peak of 54.9 percent in March 2015 to 54 percent in March 2016 after steadily rising since 2009, the government said.
The Liberals also announced new tax breaks for individuals and companies, starting in 2017 with a gradual reduction in the general corporate income tax rate from 11.9 percent to 11.5 percent in 2020.
Leitao said the government would hold talks in the spring to consider future tax reductions for individuals after a charge for health care that brings in C$1.7 billion a year is gradually eliminated.
“I’m very much in favor of a substantial reduction in personal income tax,” he said.
The government remains committed to a vast resource development project in northern Quebec, called Plan Nord, Leitao said.
Editing by Andrew Hay; and Peter Galloway