NDP, living in fiscal fantasy world, must face reality

If you believed the NDP’s promise during the 2023 provincial election that they’d balance the books by the end of their first term in office, you might want to brace yourself for some disappointment.

The Conference Board of Canada’s latest assessment of Manitoba’s finances shows the province isn’t even close to turning a deficit into a surplus in the next two years. In fact, the independent think tank says it could be at least five years before the province’s budget is balanced again.

That’s not a small miss. That’s a blown tire on the fiscal highway.

Premier Wab Kinew and Finance Minister Adrien Sala have been repeating for months that they still plan to balance the books by 2027. Unless there’s some magical surge in revenue or a willingness to make deep spending cuts, that is a fantasy. The conference board’s analysis makes that painfully clear.

The problem isn’t only the deficit, which is projected to be $794 million in 2025-26. It’s also the structural imbalance between what the province spends and what it takes in. You don’t close a gap of that size in two years without serious belt-tightening or significant tax increases. Neither appears to be on the table.

The report, released last week, projects Manitoba’s deficit will shrink to $540 million by 2029-30. That’s nowhere near what the NDP estimates. The 2025 provincial budget projects the deficit will shrink to $327 million in 2026-27 and return to balance in 2027-28.

That’s highly unlikely, the report found, splashing cold water in the face of the province’s fiscal daydreaming. It projects Manitoba’s red ink will persist for years, with the debt continuing to climb well into the next decade.

Debt-servicing costs will eat up a growing share of the budget, crowding out spending on things such as health care, education and infrastructure.

Manitoba’s net debt is projected to hit $36.5 billion this year, according to the provincial budget. That’s up from $34.47 billion last year — a staggering 5.9 per cent jump.

The province pays $2.3 billion a year (and climbing) to service that debt. The figure will continue to increase if the province keeps borrowing to pay for day-to-day operations.

It’s not like we haven’t been warned. Economists have been sounding the alarm about Manitoba’s structural deficit for years. The problem isn’t cyclical. It’s not just about economic downturns or bad luck. It’s baked into the system. Manitoba has for years spent more than it brings in.

The previous Progressive Conservative government had its share of fiscal mismanagement, often promising balance but kicking the can down the road most years. The NDP campaigned in 2023 claiming they could do better — that they could protect services, avoid major cuts and still get balanced in four years.

The math never really added up, and it certainly doesn’t now.

They promised balance without cuts but inherited a fiscal mess. They have to choose between breaking their promise to balance the books by 2027 or breaking their promise to protect spending on health care and other key services.

They’ll likely choose the former because it’s the lesser of two evils, politically. Slashing spending two years before an election is a quick way to lose it. Delaying balance, on the other hand, is easier to spin: blame global economic uncertainty, U.S. tariffs, federal funding shortfalls or the financial mess left behind by the PCs.

That spin won’t change the hard numbers. Debt will keep rising, interest costs will keep growing, and the province’s ability to invest in services will keep shrinking.

For some, balanced budgets might seem like an abstract accounting exercise. But the consequences of running large deficits for years are very real.

When debt increases faster than the economy grows, credit rating agencies start to take notice. A downgrade makes it more expensive to borrow, which means even more money going to interest payments instead of services. That can lead to a vicious cycle: higher interest costs, deeper deficits and even less flexibility to respond to crises.

It also means less room for tax relief. Manitobans already pay among the highest combined tax burdens in the country when you factor in income, sales and property taxes. The more we spend on debt interest, the less we have to invest in making the province a more attractive place to live and do business.

Some will argue deficits don’t matter as long as the economy grows and interest rates stay manageable. But that thinking is exactly how governments dig themselves into holes they can’t climb out of. Interest rates might be easing slightly now, but they could easily head north again, especially if inflation begins to climb.

There’s no magic wand here. It’s going to take discipline and transparency, and almost certainly more time than voters were led to believe, to return to balance.

The conference board’s forecast isn’t a death sentence for Manitoba’s finances, but it is a wake-up call.

tom.brodbeck@freepress.mb.ca