(Bloomberg) -- Alberta expects to end the fiscal year with a larger surplus than it previously forecast as higher-than-expected oil prices and a surging population generate more tax revenue.
The surplus at the end of the 2024-25 fiscal year will total C$2.93 billion ($2.17 billion), eight times the size of the C$355 million surplus originally projected in the budget, the province said Thursday. Revenue is forecast to be C$2.7 billion more than budgeted as income taxes rise and higher-than-expected oil prices and production boost resource revenue.
Alberta, home to the world’s third-largest crude reserves, is benefiting from stronger local oil prices and higher output, helped by the startup of the expanded Trans Mountain pipeline. At the same time, the province’s population is growing rapidly as people seek jobs and cheaper housing than in urban centers such as Vancouver and Toronto.
Expenses are expected to be C$101 million more than budgeted, due to higher education costs and disaster relief following a fire that burned down parts of the iconic mountain town of Jasper.
The newly expanded Trans Mountain pipeline, which began operation in May, added almost 600,000 barrels a day of extra oil export capacity to the British Columbia coast. West Texas Intermediate oil prices will average $76.50 a barrel over the fiscal year, $2.50 higher than budgeted, Alberta said.
Here are more highlights from the budget update:
- Gross domestic product is expected to rise 3.3% this year, up from 1.8% last year
- The province’s population will jump 4.6% in 2024, faster than the 4.1% rate last year
- Taxpayer-supported debt is expected to be C$86.1 billion by the end of March, C$1.7 billion less than budgeted
- Debt-servicing costs will be C$3.2 billion, or C$181 million lower than expected
- The province is using C$3.7 billion – half of the surplus cash from the 2023-24 fiscal year – to pay debt coming due, with C$1.8 billion repaid in 2023-24 and C$1.9 billion to be repaid in 2024-25.
- Of the remainder, C$2 billion will be deposited into the province’s Heritage Fund, and the remaining C$1.7 billion will be used to limit new borrowing in 2024-25.
- Alberta expects to have a cash deficit at the end of 2024-25 and will need to borrow C$600 million.
- The province is using C$3.7 billion – half of the surplus cash from the 2023-24 fiscal year – to pay debt coming due, with C$1.8 billion repaid in 2023-24 and C$1.9 billion to be repaid in 2024-25.
- The Alberta Heritage Savings Trust Fund grew to a market value of C$23.4 billion in the first quarter, earning a 2.1% return with a net investment income of C$509 million.
- The province aims to build the Heritage Fund to between C$250 billion and C$400 billion by 2050 to reduce reliance on resource revenue
©2024 Bloomberg L.P.
