Manitoba deficit soars to $1.1 billion Finance minister firm on getting back in the black; Tories skeptical By: Carol Sanders Posted: 6:12 PM CDT Friday, Sep. 26, 2025 Last Modified: 8:05 PM CDT Friday, Sep. 26, 2025 Updates

Manitoba’s finance minister reiterated his promise to slay the deficit by the next election despite unleashing a financial outlook tainted by a larger-than-forecast deficit and lower growth.

“I want to ensure Manitoba we are making headway reducing the large deficit that was left to us by the PCs,” Adrien Sala said Friday as he unveiled a fiscal update for the first quarter of 2025-26 and last year’s public accounts.

Government figures show the province ran a deficit of $1.1 billion in the fiscal year that ended March 31— $353 million higher than it originally planned.

Progressive Conservative Leader Obby Khan said Sala can’t possibly balance the books before the next vote, which is set for Oct. 5, 2027.

“They have no plan to balance the budget,” the Opposition leader said.

The deficit ended up higher despite the government booking hundreds of millions of dollars from a settlement in which major tobacco companies will pay provinces for smoking-related health costs.

The net impact of the tobacco-related settlement for 2024-25 is $421 million, after $29 million in legal fees were deducted. Further payments in five-year increments will depend on tobacco revenue, Sala said.

Friday’s fiscal update shows the 2025-26 deficit is forecast to end up at $890 million — $96 million higher than expected — partly because of the cost of fighting wildfires.

So far, the cost of forest fires and evacuations is pegged at $179 million and the fire season is not yet over. The second consecutive year of drought affected Manitoba Hydro revenue, resulting in a $63 million loss in 2024-25.

The province’s 1.2 per cent GDP growth last year was less than the 1.7 per cent projected. This year’s 1.3 per cent growth projection is “optimistic” because Canada is “hovering” close to a recession, said one economic expert.

“When that happens, the revenues of the province are adversely affected and then your expenditures go up a bit more,” said Phil Cyrenne at the University of Winnipeg.

“With budgeting, you have to be careful because there are these shocks that come and, sometimes, are out of your control.”

Despite the gloomy outlook, Sala offered assurances the province is on the path to a balanced budget and is fiscally sound, noting that bond rating agencies haven’t sounded any alarms.

“I would also like to acknowledge that both Moody’s and (Standard & Poor’s) have recently reaffirmed our credit rating.”

The finance minister wouldn’t say where spending would be cut or whether taxes and fees would be increased to boost provincial coffers.

“This is about ensuring that we look ahead and that we make a plan that will ensure that departmental expenditures align to revenues over the next two budgets, and so we’ve committed to doing that work,” he said, acknowledging the challenge is steep.

“When I say planning, I mean we’re locked away over the summer doing planning for multiple weeks, looking ahead, looking at every variable… which will show the path towards delivering on that balanced budget in two years,” Sala said.

“I would also like to acknowledge that both Moody’s and (Standard & Poor’s) have recently reaffirmed our credit rating.”

The public may start to question the NDP government’s vow to balance the budget after posting successive deficits, Cyrenne said.

“You can only do that so many times before people say ‘We know you’re not really serious.’”

That may not result in a political cost to the party, though, Cyrenne said.

“My sense is the base of the New Democratic Party is not overly concerned with the deficit,” he said.

“Usually, you only react under pressure. I don’t see them feeling any strong pressure to do something that would be significant in terms of reducing expenditures,” the economics professor said.

That could change with negative shocks to the economy, Cyrenne said.

“When you’re budgeting, you have to err on the side of caution because most shocks tend to be adverse shocks… If you don’t plan for this adversity, then your budget is going to get out of control,” said Cyrenne.

“The NDP have always been vulnerable when they tend not to worry too much about deficits,” he said.

“My sense is the base of the New Democratic Party is not overly concerned with the deficit.”

The economic development strategy unveiled Thursday by Premier Wab Kinew that aims to spur private investment is too little and too late, the PC leader said.

“We are in major trouble under this NDP and their out-of-control spending,” Khan said.

Kinew has championed mining as well as a nation-building project at the Port of Churchill, Cyrenne said.

On Thursday, the premier said the project could pave the way to Manitoba becoming a “have” rather than a “have not” province by 2040. Manitoba is considered a “have not” province because it relies on equalization payments from the federal government to fund essential services such as health care.

Cyrenne said that NDP governments often worry about environmental issues such as mining and industrial expansion in Hudson Bay.

“He’s mentioned things that are a little more centrist than I think people might have been expecting,” Cyrenne said about the premier.

“To give him credit, I think he realizes that the economy has to grow in some way if he wants to do what he thinks needs to be done on the social side.”

— with files from The Canadian Press

carol.sanders@freepress.mb.ca