Mid-Year Financial Update
Loyola Sullivan, Minister of Finance and President of Treasury Board, today provided a mid-year update on the province’s finances.
"Last March government brought down a demanding budget which required difficult decision-making. Our goal was to turn around the serious fiscal situation we inherited one year ago, and we are beginning to make progress. At this point in the fiscal year, we are ahead of our budget targets," said Minister Sullivan.
At budget time the deficit was projected to be $839.6 million. Based on results to date, the deficit for 2004-05 is now expected to be $707.5 million, an improvement of $132.1 million, of which $102.5 million is one-time revenue as a result of prior year adjustments.
"While the deficit has improved since budget time, it is still the second highest in our province’s history, and record deficit levels only add to our record debt levels," said the minister. "There is still much work to be done to gain control of our province’s finances."
With the revised deficit, the province’s net debt is now projected to be $12.2 billion. "This is almost double what it was 10 years ago, and for a smaller province like Newfoundland and Labrador, this is a crippling debt-load. We must work hard to ensure that the debt does not increase," said Minister Sullivan.
The variance in the deficit results primarily from an increase in oil prices, revised federal estimates of equalization and new health care money.
"On the expenditure side, the budget projections overall remain on track," said Minister Sullivan. "Throughout the year, it is common to experience variances in expenditures, and overruns in one area are offset by savings in another. With continued vigilance, we expect to maintain budget targets for expenditures."
In terms of cash requirements, the 2004-05 budget projected a need of $361.6 million. The total cash requirement is now projected to be $118 million, an improvement of $243.6 million. This change is primarily due to the variances listed above, as well as the deferral of the census loan repayment.
"From a cash-flow perspective, one-time revenues have contributed significantly to the improvement. Those revenues will simply not be available for the next budget," said Minister Sullivan.
The minister said that while some progress has been made in addressing the province’s fiscal situation, the work is far from over. "We have experienced some improvements in revenues for this fiscal year, but it is unrealistic to expect these to continue on an on-going basis. We will have to find further ways to generate revenue while still controlling our expenditure base. We will continue to carefully monitor budget pressures, with the focus on maintaining our budget targets," concluded Minister Sullivan.
Media contact: Diane Keough, Communications, (709) 729-6830 or (709) 685-4401
2004 12 15 3:35 p.m.