(Bloomberg) — Alberta cut its budget surplus forecast by nearly CA$1 billion ($750 million) after it introduced a slew of tax breaks and welfare benefits to help residents of the oil-rich province cope with higher prices.
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The province’s surplus will be CA$12.3 billion in the current fiscal year ending March, up from CA$13.2 billion estimated in August, according to the government in its mid-year financial update.
The smaller surplus reflects a C$2.5 billion increase in spending, including a C$1.3 provision to cover inflation measures announced by Prime Minister Danielle Smith on Tuesday. These include a six-month suspension of the state fuel tax, support for parents and other relief benefits.
Alberta gives $1.8 billion in inflation support as oil money rolls in
The actions will also result in expenditure accruals totaling $1.2 billion in the fiscal 2023-24 budget and $300 million in the 2024-25 budget.
Alberta, which has the world’s third-largest oil reserves, is benefiting from oil prices that rose as high as $130 a barrel after the Russian invasion of Ukraine but have since fallen below $80.
The new forecast surplus is almost 24 times larger than the original forecast of a surplus of $515 million in February. The province posted a deficit of C$16.9 billion for the previous fiscal year ended March 2022 amid depressed oil prices and falling energy investments during the Covid-19 pandemic.
Other highlights of the fiscal update include:
Revenue in 2022-23 is forecast at CAD$76.9 billion
Real gross domestic product will grow by 4.8% this year and by 2.7% next year
Taxpayer-supported debt is expected to be CA$79.8 billion at the end of the current fiscal year, down CA$10.3 billion from the previous estimate
Update expects West Texas Intermediate crude to average $91.50 a barrel in the current fiscal year, down $1 from the first quarter forecast
Canadian heavy crude oil’s discount to WTI has widened to more than $25 a barrel amid refinery disruptions and oil releases from strategic petroleum reserves
Revenues from non-renewable resources, including hydrocarbon royalties, will reach $28.1 billion in the current fiscal year, falling to $19.2 billion in 2023-24 and $16 billion in 2024-25 when energy prices fall
The government confirms that it will repay $13.4 billion in debt in the current fiscal year
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