IG news Update,
Saskatchewan is likely to take a cautious approach when it comes to the declared surplus in the 2023-24 provincial budget, according to an associate professor of economics at the University of Regina.
When Finance Minister Donna Harper presented the budget on Wednesday, one of the highlights was the province’s projected surplus of $1 billion.
Jason Childs said that while there is not much being done to immediately address ongoing affordability issues in Saskatchewan, it is likely that the government realizes that the surplus is from a place of unsustainable spending compared to last year. has come.
“My hope is that it is out of extreme caution and understanding that these revenues are highly volatile,” Childs said.
Most of the province’s current untapped resources are coming from non-renewable resource revenue.
In 2023-24, the province estimates potash will bring in about $1.3 billion and oil and gas about $963 million, two commodities highly affected by global events, such as the conflict in Ukraine.
“Oil is going to be particularly subject to geopolitical events, so if somehow we saw a resolution to the conflict in Ukraine and Russia was allowed to re-enter the global oil export market, there would be a huge upside to the oil price. Change may be coming,” Childs said.
He also said that a similar scenario could emerge with Potash as well.
“So when revenue is this volatile, making them [too much] Investing in event expenses is a really good way to take out trouble you don’t need to.
Childs put it simply, current and projected non-renewable resource revenue is something that can be flipped on as quickly as a light switch.
“We saw something like this happen in 2014, when Saudi Arabia decided they were going to discipline OPEC members and really try to exert control over the global oil markets by increasing production,” Childs said.
According to Childs, building resource revenue into large amounts of program spending is always a bad idea in every scenario.
He said, ‘I cannot stress this enough. “I would love to see Saskatchewan do what Norway has done which keeps everyone safe. Now they are in a wonderful position in that they have this incredible sovereign wealth fund that effectively completely isolates them from any of these ups and downs.
Childs said Saskatchewan is not in that position yet and has to spend some non-renewable resource revenue on program spending.
However, he agreed that the province had been forced to be cautious about its spending this fiscal year.
“Yeah, and it’s really encouraging to hear that the government is making statements that say this revenue could be temporary so we can’t factor it into the program’s expenditure. It has to be fiscally responsible, which is really encouraging to hear,” he said.
Childs said he’s also really happy to see the debt come down.
“So the 2023 budget had $32.6 billion in debt and now we’re at $30.8, that’s really encouraging. We’re seeing that loan number move in a really positive direction.
Childs also said that in the current economic climate, it is also a positive sign to see a decline of nearly $3 billion in taxpayer-backed debt.
“It’s a really good investment for the future because all that debt is going to roll over eventually at that high interest rate, so if we don’t pay it down now our debt service costs will go up,” he said.