HALIFAX — Nova Scotia is facing a staggering financial crisis as it projects a record-breaking deficit of $1.2 billion for this fiscal year, an alarming leap from the previously estimated $697.5 million. This update, unveiled by Finance Minister John Lohr, highlights the urgent economic challenges affecting the province.

Key factors contributing to this dramatic increase include a drop in provincial revenues by $44.9 million, driven by sluggish population growth and reduced consumer spending in a slowing economy.

Despite these dismal figures, Minister Lohr refrained from commenting on whether spending cuts would be necessary. He emphasized the government’s commitment to healthcare reforms, acknowledging that much of the increased expenses stem from healthcare demands. "We were elected to fix health care, and we're dedicated to meeting the needs of Nova Scotians," Lohr stated.

Economic forecasts reveal that the province's real GDP growth rate is now only 1.4%, a notable decline from the earlier projection of 2%. Flat population growth at 0.9% poses challenges to labor force participation, and international trade disruptions—particularly from tariffs on seafood—further hinder export growth.

In the face of these challenges, the province has not tapped into a $200 million reserve fund allocated in the budget to offset potential revenue declines from tariffs.

On the spending side, the government has overshot forecasts by $503 million, with healthcare taking a staggering $410.9 million more than anticipated due to inflation and increased staffing needs. Healthcare now consumes 46% of the overall budget, totaling $8.3 billion.

When pressed on the sustainability of such expenditure, Lohr asserted that spending levels are comparable to national averages and are strategic investments for the future.

Critics, however, are not convinced. NDP Leader Claudia Chender accused the government of engaging in "creative accounting," pointing out a history of overestimated deficits that often result in surpluses. "We have the highest spending in history and very little to show for it," she remarked.

Interim Liberal Leader Derek Mombourquette voiced concerns about the implications of a deficit exceeding $1 billion for a population of just over one million, insisting on the need for strategies to stimulate economic growth, while warning against the burden of generational debt.

As it stands, the net debt rose to $20.84 billion as of March 31, increasing by $1.7 billion from the previous year due to an accounting change that included $879.9 million in long-term care loans as tangible capital assets.

In a twist, Lohr revealed that the province ended the last fiscal year with a surplus of $264.8 million, a significant turnaround from a predicted deficit of $467.4 million.

As Nova Scotians brace for the financial fallout, the government's approach in the coming months will be under intense scrutiny.