Alberta ended the 2020-21 fiscal year with a deficit of C$17 billion ($13.7 billion), nearly C$10 billion higher than forecast in its budget, due to the COVID-19 pandemic and oil price collapse, the government said on Wednesday.
The deficit for the fiscal year ended March 31 was C$4.8 billion more than the previous year. Alberta said it took a C$1.3 billion in loss on its investment in the Keystone XL oil pipeline, which was formally cancelled earlier this month after U.S. President Joe Biden revoked a key permit.
Alberta is Canada’s largest oil-producing province and home to the oil sands, the world’s third-largest crude reserves. Its economy is closely tied to oil prices, which cratered last year as the pandemic decimated global fuel demand, while the province also imposed its own strict lockdowns to combat COVID-19.
Provincial finances showed some improvement toward the end of the fiscal year. The deficit was C$3.2 billion lower than the government’s third-quarter forecast made last November.
Travis Toews, Alberta’s minister of finance, said a stronger-than-expected rise in crude prices in early 2021 helped boost revenues from oil sands royalties, while corporate and personal income taxes also rose from the third-quarter forecast.
“Last year was very difficult for many Albertans, but the province is emerging stronger than expected,” Toews said in a statement.
Investors see less risk in Alberta’s bonds as surging energy prices boost the outlook for the province’s finances and oil sands operators begin to address the sustainable investment trend.
Alberta’s gross domestic product contracted by an estimated 8.2% in 2020.
The neighbouring prairie province of Saskatchewan also released a 2020-21 budget update on Wednesday. It posted a deficit of C$1.13 billion, C$1.3 billion less than forecast in its budget, helped by federal government transfers to tackle COVID-19 and favourable crop conditions that boosted its agricultural sector.