Canada’s Quebec to balance books, slash debt, protect head offices

March 21, 2019

By Allison Lampert

QUEBEC CITY, Quebec (Reuters) – Quebec’s government said on Thursday it would balance its books in 2019-20 while cutting debt and announced a plan to invest C$1 billion ($747.7 million) to help keep corporate head offices in the predominantly French-speaking Canadian province.

The center-right Coalition Avenir Quebec (CAQ) government, elected for the first time in October with a legislative majority, forecast a net surplus of C$2.5 billion ($1.9 billion) for fiscal 2018-2019 ending March 31, after investing C$3.1 billion in a provincial debt-fighting fund.

The province had forecast a C$1.7 billion surplus in December.

The document came two days after Canadian Prime Minister Justin Trudeau’s government lavished new spending on middle-class voters in its budget, ahead of the October federal election.

Quebec Finance Minister Eric Girard used his first budget to support the provincial economy ahead of weaker growth expected in coming years. He announced higher spending on social programs and incentives to increase participation in the labor force by retaining older workers.

Girard said Quebec would invest C$1 billion toward growing business and retaining head offices, saying precise details would be announced later.

He said the fund was not designed for Montreal-based construction firm SNC-Lavalin Group Inc but “could be used” to help the company, which is at the center of a widening political scandal involving Trudeau’s government.

Trudeau denies allegations that senior officials last year pressured his then-justice minister to allow the company to avoid a corruption trial by paying a big fine instead.

SNC-Lavalin has said it might have to move – or cut – some of its Canadian workforce of 9,000 if the company is found guilty of bribing Libyan officials.

Girard also pledged to deliver four additional fiscal years of balanced budgets.

“We’re working on all these fronts to increase GDP per capita,” Girard told reporters.

The CAQ said 2019 growth would be 1.8 percent before slowing to 1.5 percent in 2020. Last November, Girard said rising interest rates and trade turbulence between the United States and China would weigh on growth.

Quebec added its net C$2.5 billion surplus to a provincial contingency fund used in the case of an economic downturn, while Girard announced investments to attract private investment.

Girard also said he wanted to cut Quebec’s net debt to 35 percent from 40 percent as a percentage of GDP by March 2024.

“Pay now, benefit later, this is what this budget is all about,” Laurentian Bank chief economist Sebastian Lavoie said in an interview.

(Reporting by Allison Lampert; Writing by David Ljunggren; Editing by Chris Reese and Peter Cooney)

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