08:33 AM EDT, 03/19/2026 (MT Newswires) -- As with many of its peers, Saskatchewan's FY2026-27 (FY2027) budget reflects a fiscal outlook that has darkened since last year, which presented a balanced path, said Desjardins.

The province in Canada now forecasts a $1.2 billion deficit (1.0% of nominal gross domestic product) in FY2026, narrowing to $800 million (0.7% of GDP) in FY2027, and the balance pushed out to FY2031.

This shift is driven less by revenue weakness and more by spending decisions that have outpaced revenue growth, noted the bank. Revenues are modestly softer than last year's projections due to lower assumed energy prices, a drag that is partly offset by resilience in other sectors.

The primary source of bottom-line deterioration lies on the expenditure side, stated Desjardins. Program expenditures have increased at a faster pace than previously planned, reflecting a combination of new policy commitments and ongoing cost pressures.

As a result, Saskatchewan now finds itself materially further from balance, despite entering the year on a relatively steady economic footing.

Saskatchewan's borrowing needs rise alongside wider deficits, reaching $5.3 billion in FY2027, with debt repayments of $1.7 billion. This follows an increased forecast of $5.8 billion in FY2026, up from $4 billion estimated in last year's budget, mostly due to the deeper deficit now projected, ti addd.

While the province continues to borrow predominantly in Canadian dollars (CAD or loonie) -- with roughly 81% of outstanding debt denominated in CAD -- it has recently stepped up issuance in international capital markets, particularly in Europe. This diversification has helped lower overall borrowing costs, pointed out Desjardins.

Overall, the signal to investors is likely "mixed," according to the bank. A return to deficit on the back of higher spending may raise credit-related concerns.

However, Saskatchewan is known for having one of the tightest yield spreads on its 30-year bonds to those of the Government of Canada (GoC), reflecting the province's track record of strong fiscal management. Having hit the lowest level in at least 15 years in early February along with several other provinces, spreads have since widened with global uncertainty.

That said, this spread widening was probably mitigated more recently for Saskatchewan by the likely anticipated positive fiscal impact of higher oil prices.