A stabilization reserve of $ 1.8 billion will be sufficient, ” says Carlos Leitão

Photo: Jacques Boissinot The canadian Press
The minister of Finance, Carlos Leitão

The stabilization reserve, which would serve as a day to take the shock of an economic downturn on the finances du Québec, is $ 4.6 billion, but its ideal level is significantly lower, according to the minister of Finance.


To fund the various measures announced on Wednesday in its economic update, including a significant tax cut, the government Couillard account extract 250 million to this reserve this year, 1.4 billion in 2018-2019 and $ 750 million the following year.


The budget surpluses automatically trigger a payment to the reserve, according to the law. Over the next few years, which will be marked by a balanced budget, the reserve will increase to 4.55 billion to $ 1.8 billion in 2021-2022.


“We believe that it is around 2 billion, to cope with an impact on GDP of three percentage points “, said the minister Carlos Leitão during a meeting with the press at the end of his speech to the Chamber of commerce of metropolitan Montreal.


Such an economic slowdown would be ” important “, says Mr Leitão, ” and so 2 billion is a margin prudent “.


After a growth of 1 % in 2015, the quebec economy grew 1.4 % in 2016. This year, it is projected to reach 2.6 %, or 0.9 points more than what Québec anticipated last march.


Uses of the reserve


According to government documents published this week, the reserve serves to “facilitate the budget planning multi-year” of Quebec. “It must be used in priority to maintain a balanced budget and, subsidiarily, it may be used for the reduction of the debt by the payment of sums into the generations Fund. “


It is generally agreed that a variation of 1 percentage point of gross domestic product results for the own-source revenue of the québec government, a shortfall of 600 million.


Quebec includes self-generated revenues of 83.7 billion in 2017-2018, according to the most recent projections, an amount which should be added 22.8 billion in federal transfers.


The stabilization reserve was heading for a sum of 4.7 billion, the cumulative result of a surplus of 2 billion in 2015-2016 and a surplus astonishing $ 2.7 billion in 2016-2017. Among tax experts and economists, the ideal level raises questions for months.


“No one has ever had that, a reserve as big “, said this week the tax expert Luc Godbout, Université de Sherbrooke, ex-president of the examination Commission on the taxation of quebec.


“I thought it would happen this year, saying : “What is the amount that you want to have as a stabilization reserve ?” I thought there would be more of a question than a decision. There is no right answer, but if you look at the last recession, this deficit of $ 16 billion that we have seen. “


The accumulation of a reserve of 16 billion would likely be critical, according to Mr. Godbout, who believes that a fund ” from 5 to 10 billion would be […] reasonable.”


A respected economist associated with the CIRANO, Jean-Pierre Aubry, was astonished by the scale of the cushion of stabilization in the month of June, when an update of the public finances has revealed that it amounted to approximately $ 4.7 billion. “That amount over two years that was not spent… That is what we would have been able to afford ? That is the question. What is the other end of the equation ? ” he said to the Duty.


In the United States, all States except three have put in place a system of stabilization reserve. The formulas range from the payment of the annual surplus to an automatic payment.

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