Provincial Budgets

April 14, 2026 | 15:22

PEI (FY26/27) — Red Sand and Ink

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

The Province of Prince Edward Island is projecting a $410 million budget deficit for FY26/27, following a much larger-than-expected shortfall of $450 million now expected for FY25/26. Recall that the original budget plan had estimated a $184 million deficit, but somewhat softer revenues and sharply higher spending have dragged the province deeper into the red. At roughly 3.5% of GDP, the FY26/27 shortfall is on track to be the largest in Canada this year. Deficits persist in future years, narrowing modestly to $338 million by FY28/29.

There were a few notable tax measures in this budget:

Ending the energy rebate program, including that for residential homes.
New P.E.I. Essentials Benefit, beginning July 1, that gives individuals $310 per year and couples $365. The benefit is available on household incomes up to $95k, and phased out by $114k.
New personal income tax bracket on income above $200k.
Increased property tax and insurance premium tax rates for nonresident owners.
Borrowing program of $900 million in FY26/27.

Total revenues are expected to rise a sturdy 3.5% in FY26/27, with own source revenues and federal transfers both moving higher. Total spending looks to rise by 2% with a few program increases tempered by trimming in some budget areas.

The deep deficits will put upward pressure on net debt this year, which is pegged at $4.5 billion, or just over 38% of GDP. Persistent deficits will push that ratio to 40% by FY28/29, toward the high end of the provincial spectrum. Long-term borrowing is estimated at $900 million for FY26/27, down very slightly from the prior fiscal year.

The Bottom Line: This is a much deeper run of deficits for PEI, potentially closing the book on a decade of effectively balanced budgets.