The Saskatchewan government is facing a critical opportunity as oil prices surge, bringing a massive resource revenue windfall. According to an opinion piece by Gage Haubrich, CTF Prairie Director, the province must avoid repeating past errors and instead use this windfall to reduce borrowing and pay down debt.
A Blessing in Disguise
The recent budget increased provincial debt by $3.4 billion and wasted over $1 billion on interest payments. With oil prices rising to $95 per barrel, the province could receive an extra $560 million this year from oil revenues. Even at $75 per barrel, an additional $245 million is expected. This surge could cut borrowing by up to 17% without any effort, but only if the government exercises discipline.
Learning from the Past
In 2021, a similar windfall led to a 25% increase in spending, matching the revenue increase. If spending had been held at previous levels, the province could have paid down $2.5 billion in debt instead of increasing it by $1.4 billion. The following year, another 14% revenue increase could have reduced debt by an additional $4.4 billion if spending had been restrained. These missed opportunities highlight the power of fiscal discipline.
A One-Time Bonus, Not a Raise
Haubrich compares the windfall to a work bonus: it should be used to pay bills or make extra mortgage payments, not to take on new debt. The government must treat this revenue as a one-time bonus, not a permanent raise. Further savings are needed to stop the debt from increasing at all this year. Overspending must end, as taxpayers cannot afford it.
The key is to avoid ratcheting up spending permanently. By showing restraint now, Saskatchewan can secure a more stable financial future and avoid the pitfalls of past resource booms.
