07:09 AM EST, 11/22/2024 (MT Newswires) -- The C$11 billion deficit estimate for the fiscal year 2024-25, unveiled in the 2024 budget, could be the highest in

Quebec's history in real dollar terms, said Laurentian Bank Securities.

In addition to using half of the C$1.5 billion contingency reserve to keep the deficit at C$11, the Quebec provincial government will send additional funding to public transport corporations and cover costs related to tropical storm Debby, noted the bank.

To mitigate the extra spending, the government of the province in Canada will make modifications to the tax credit for career extension: raising the eligibility from 60 to 65 years old in 2025 and removing high-income earners from eligibility, so saving the

government a "significant" amount of money.

Quebec has reduced its bond issuance program for FY2024-25 to C$32.5 billion, a decrease of C$3.9B, stated Laurentian Bank. This amount is between the recent low of C$22 billion borrowed in FY2023-24 and the pandemic-related peak of C$38.5 billion.

Quebec has finished its FY 2024-25 borrowing program and pre-financed C$3.1 billion for FY 2025-26. About two-thirds of the bonds were issued domestically in FY2024-25 -- in line with the provincial average, pointed out the bank.

The average maturity of bonds has increased moderately to 15.9 years. For example, about 83% of the borrowings contracted in FY2024-25 had a maturity of 10 years or more, versus 71% the prior year.

In the medium term, bond issuance is expected to stay near C$30 billion annually, which is slightly better -- C$2 billion -- than what

was planned in the 2024 budget. Fewer bonds than usual will mature in the next two to three years, allowing Quebec's borrowing program to stay just below C$30 billion in the medium term.

The provincial government is aware that it must avoid further fiscal setbacks, added Laurentian Bank. Market participants and credit agencies are expecting "bold" policy decisions in the 2025 budget to establish a credible plan for returning to a balanced budget.

Meanwhile, market participants continue to monitor developments related to the financial struggles of the Swedish battery developer and manufacturer, Northvolt AB. Quebec has invested C$500 million in the C$7 billion battery plant project, located on the south shore of Montreal.

Quebec is facing a large fiscal deficit, but recent economic growth and strategic adjustments in government spending and

taxation offer some hope for improvement, according to the bank. The 2025 budget will be a critical moment for addressing the province's long-term fiscal challenges and ensuring a path to a balanced budget.