EDMONTON, Alberta (Reuters) - The Canadian province of Alberta said on Thursday it would run a smaller-than-expected budget deficit in the coming fiscal year and vowed to balance the books by 2023-24 as it tightens spending and banks on a delayed oil pipeline getting built.
Alberta, home to Canada’s vast oil sands, has run deficits every year since 2015 when the province was badly hit by the drop in crude prices.
The province said it would run a deficit of C$8.8 billion ($6.82 billion) in 2018-19, lower than its forecast of C$9.7 billion in 2017’s budget. That includes a C$500 million cushion for risk. The deficit for the current fiscal year ending on Saturday is estimated at C$9.1 billion
The provincial government expects the deficit to narrow to C$7.9 billion in 2019-20.
The left-leaning New Democratic Party government laid out its plan for fiscal balance in 2023-24 through slower growth in operating expenses, additional revenue as the federal government’s carbon tax plan kicks in and winding down some economic stimulus measures. The budget forecasts a small surplus of C$700 million in 2023-24.
The New Democrats, who swept to power in 2015, face an election next year and are under pressure to show they can return the budget to balance after the province’s credit rating was downgraded.
The province’s forecasts include the expectation that Kinder Morgan Canada’s (KML.TO) (KMI.N) Trans Mountain pipeline expansion comes online by 2021, despite opposition from environmentalists and indigenous groups, as well as a dispute with the neighboring province of British Columbia.
Along with Enbridge Inc’s (ENB.TO) Line 3 extension, Alberta expects the two pipelines to add 1.5 to 2 percent to the level of economic growth by 2023.
“(The pipelines) will get built because they are important for Canada, they’re important for Alberta,” Finance Minister Joe Ceci told reporters.
The Trans Mountain expansion, which has been approved by the federal government, would carry additional Alberta crude to the Pacific coast.
Increased access to markets would also help offset the large price discount for Canadian heavy crude compared with U.S. light oil.
But the spread between prices and a higher Canadian dollar is expected to hamper revenue in the short term, with revenue from non-renewable resources, including oil and gas, seen decreasing to C$3.8 billion in 2018-19.
The budget assumes a discount of $22.40 per barrel for Canadian crude in 2018-19, from an expected U.S. crude CLc1 price averaging $59 a barrel. Alberta is the No. 1 exporter of crude to the United States.
Alberta will continue to borrow to fund its fiscal plan, with total debt expected to hit C$77.2 billion, or 19.9 percent of nominal GDP, by 2020-21.
By the time Alberta balances its budget, total debt will be C$96 billion, officials said.
($1 = 1.2903 Canadian dollars)
Reporting by Leah Schnurr; Editing by Peter Cooney