2023-24 Mid-Year Report Shows Revenue Growth Offset by Expense Due to Drought

Potash prices and sales impacted by global market conditions, and higher crop insurance claims due to severe drought that hit parts of the province in the summer of 2023, are the primary drivers of a deficit forecast at mid-year.

"The drought was unforeseen, reducing projected crop production by 20 per cent in 2023, when compared to 2022," Deputy Premier and Finance Minister Donna Harpauer said, as she released the 2023-24 Mid-Year Report. "Crop insurance and relief programs are in place for Saskatchewan producers. 

"Potash prices and sales dropped because potash from Russia and Belarus flowed to large markets including China and India despite being subject to Western sanctions in response to Russia's invasion of Ukraine," Harpauer said. "Even considering these impacts, our fiscal picture is solid, more people than ever are living and working in Saskatchewan, and our economy is resilient." 

A deficit of $250.5 million is forecast at mid-year, down $1.3 billion from budget, and $736.1 million from first quarter.

At mid-year, total revenue is forecast to increase $35.2 million, or 0.2 per cent, from budget.

Increases of $753.0 million in forecast revenue are largely from taxation, including Corporate Income Tax (CIT) and Provincial Sales Tax (PST), showing strength in the economy.  Government Business Enterprise (GBE) net income, Other Own-Source revenue and Federal Transfers are up from budget, as well. 

Increases are largely offset by a $717.8 million decrease in forecast Non-Renewable Resource (NRR) revenue at mid-year compared to budget, mainly attributable to potash revenue as prices have declined by 28.6 per cent and production is down 5.9 per cent from budget.

Resource Surcharge revenue has also declined, driven primarily by lower potash prices and sales. NRR revenue decreases are partially offset by increases in Oil and Natural Gas revenue and Crown Land Sales revenue forecast at mid-year compared to budget.

At mid-year, total expense is forecast to be up $1.3 billion, or 7.0 per cent from budget. 

Agriculture expense is forecast to be $853.0 million higher than budgeted, primarily due to increased crop insurance claims, a result of severe drought in parts of the province in the summer of 2023. 

Contributing to higher expense is non-cash pension expense in the Saskatchewan Teachers Superannuation Plan and the Public Service Superannuation Plan, which was reported at first quarter. Forecast expense for wildfire response and evacuations are higher than budgeted, and were also reported at first quarter.

Gross debt is forecast to be $31.6 billion at fiscal year-end, up $709.5 million from budget. Borrowing is increasing to finance capital, including investment into schools, highways, hospitals and other valued infrastructure.

The plan to retire up to $1.0 billion in operating debt in 2023-24 remains unchanged at mid-year, a result of sound fiscal management and sufficient cash balances from the prior fiscal year.

Saskatchewan's net debt as a percentage of Gross Domestic Product (GDP) is expected to be 13.3 per cent at the end of 2023-24, second lowest among Canadian provinces.

"Saskatchewan's population reached 1,209,107 in July 2023, after experiencing the largest single year increase since 1914, as 30,685 more people made Saskatchewan their home," Harpauer said. "A record 605,300 people were working in Saskatchewan and the unemployment rate was 4.4 per cent in October 2023, the lowest rate among the provinces and well-below the 5.7 per cent seasonally-adjusted national average."

Saskatchewan had the highest economic growth among provinces in 2022, with 6.0 per cent real GDP growth. An average of private sector forecasts has Saskatchewan's economic growth at the second highest among the provinces in each of the next two years, with real GDP growing by 1.6 per cent in 2023, and 1.3 per cent in 2024.