Finances of the Nation: The Impact of COVID-19 on Provincial and Local Government Finances

In this article, Ayaka Behro and Michael Smart explore the impact of COVID-19 on provincial government finances. While spending rose in all provinces in the 2020-21 fiscal year, so did revenues in many provinces, cushioning the impact on deficits. While grants and income tax revenues rose in many provinces, largely owing to federal policies, consumption tax and natural resource revenues fell sharply. Comparing provinces, higher COVID-19 caseloads were associated with higher health spending and lower consumption tax revenues. These findings suggest that COVID-19 has had a more damaging impact on provincial finances than initial forecasts had suggested.