BMO Says British Columbia Projects A "Hefty" Provincial Deficit

06:15 AM EST, 02/18/2026 (MT Newswires) -- The Canadian province of British Columbia is projecting a $13.3 billion deficit in FY26/27, or a "hefty" 2.9% of gross domestic product, said Bank of Montreal (BMO).

The FY25/26 deficit was revised down to $9.6 billion ($11.2 billion as of the prior fiscal update), while still-large deficits persist through the forecast horizon, noted the bank.

By FY27/28, the province is still showing an $11.4 billion shortfall, or more than 2% of GDP, despite a round of income and sales tax increases. There is no explicit forecast allowance in this budget, which is a break from convention, but there is $5 billion of contingency funding built into each year of the plan, stated BMO.

To its credit, B.C. is also leaning on more diligent expenditure management, including direct operating expenses, while deferring some capital investment to help temper the expansion of debt, pointed out the bank. Still, debt continues to rise through the forecast horizon, with net debt-to-GDP topping 33% by FY28/29 -- from 23.6% for the upcoming year -- which could move it into the neighborhood of Ontario and Atlantic Canada.

According to BMO, this is the summary of major policy measures:

-- Income tax hike on the first bracket, from 5.06% to 5.60%, and a pause on tax bracket indexing from 2027 to 2030.

-- Widening the PST tax base by including some professional services (for example, accounting, engineering services, and commercial real estate fees) and removing some exemptions (such as basic cable TV, landline phones).

--A one percentage point (ppt) increase in the Speculation and Vacancy Tax for foreign owners and untaxed worldwide earners, to 4% starting in 2027.

-- Increase in the Additional School Tax rate for properties valued between $3-to-$4 million (+0.1 ppt to 0.3%) and above $4 million (+0.2 ppts to 0.6%) for the 2027 tax year.

-- $50 million in new provincial funds and reallocated federal funds for tariff relief, including to the forestry and steel sectors, and for wildfire resilience.

-- A new 15% refundable tax credit for businesses investing in buildings, machinery and equipment used for manufacturing and processing. The temporary credit is effective April 1, 2026, to March 31, 3031, and will be reduced by 2.5 ppts per year.

-- A $400 million B.C. Strategic Investments Special Account to support Ottawa's efforts and direct some of that federal funding to the province.

-- Almost $38 billion in taxpayer-supported capital spending over the next three years, with some projects "re-paced".

-- Planned 15,000 reduction in public-sector employment over three years.

-- Gross borrowing rises to $35 billion in FY26/27 and FY27/28.

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