The Rock in a Hard Place: The Difficult Fiscal Challenges Facing Newfoundland and Labrador

Economists Outline Causes and Cures for Newfoundland and Labrador’s Fiscal Woes

• Leading economists Don Drummond and Louis Lévesque turn a spotlight on the root causes of the province’s current fiscal predicament – and prescribe solutions to help safeguard the province’s financial future.
• The authors track the province’s current fiscal problems back to 2012/13 when the budget balance swung back into deficit and the net debt burden rose. Large budgetary deficits had already opened before the negative impacts of the COVID-19 pandemic compounded the situation. Without strong corrective action, provincial finances appear to be set on an unsustainable track, with net debt to GDP reaching almost 60 percent by 2025 and interest payments eating over 14 percent of revenues.
• Drummond and Lévesque identify that program spending significantly and chronically in excess of other provinces constitutes by far the largest factor explaining the province’s current fiscal challenges.