Don't be surprised if the $463 million deficit in the Saskatchewan budget for this year magically turns into a surplus.
Finance Minister Donna Harpauer used conservative estimates in her budget last month — perhaps to ensure avoiding that embarrassing Saskatchewan Party mistake when soaring potash prices had Finance Minster Ken Krawetz overestimate royalties by $1 billion.
Harpauer estimated WTI oil prices averaging $75.75 U.S. this year but sanctions on Russian oil and war in Ukraine have pushed the price beyond $100. It’s hard to see them falling to $75 a barrel within the next 12 months, even if there is a sudden end to the war.
Every $1 increase in a barrel of oil puts another $14 million into the treasury. A $100 average price would flow another $350 million into the till.
Her potash price estimates are about 20 per cent below current trades
And the forecast for two main grain crops of wheat and canola is well below current market prices. Her canola estimate of $7.23 a bushel is 60 per cent lees than the current price. Her wheat estimate of $9.22 a bushel is 18 per cent less than the market is paying
Given farm planting, harvest and transport issues in Ukraine and other crop issues like China it seems these prices could remain high for the next year.
And the Harpauer estimate of GDP growth at 3.5 per cent after inflation is less than the average 4.1 per cent of eight private forecasts — with a range of 2.9 per cent to 4.3 per cent.
Work on that $13.6 billion of new private investment projects in the next two years will add to revenues and to inflation.
A couple of possible events could throw a monkey wrench into the mix.
Severe drought could reduce farm incomes and taxes even with ultra-high prices. Another severe wave of the COVID-19 could see more than the $91 million allocated for pandemic needs spent.
The minister has promised if revenues exceed estimates the increase won’t be applied to the deficit but as a windfall will be used elsewhere. She did not specify where.
A good guess on the use of extra revenues would be for political purposes.
There might be one of those intermittent lip service payments against the $30 billion debt — $5 billion of which was accumulated during the last five years.
More likely with an election just two years away in 2024 the funds will be used for goodies to attract votes — a little tax reduction here, some capital projects there and goodies everywhere.
Ron Walter can be reached at [email protected]
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
