N.L. deficit balloons to $1.8 billion, as Liberals take reins

While premier-designate Dwight Ball waits for an update on the state of Newfoundland and Labrador's finances, CBC News has learned that low oil prices and a drop in production will cause an already record deficit to grow.

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The new deficit forecast is $1.8-billion, according to multiple sources with direct knowledge of government finances.

That's a stark increase from the budget day forecast of $1.18-billion.

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That shortfall is caused almost entirely by the slumping oil economy.

Overall revenues are down $700 million from what the outgoing Progressive Conservative government projected in its April budget.

Briefing documents being prepared for new government

Sources say these updated numbers are contained in briefing documents being prepared for the incoming government as part of the transition of power.

The gloomy financial picture creates a challenge for the Liberals as one of Ball's core election promises was to roll back a two percentage point increase in the harmonized sales tax, which the PCs announced in the last budget.

If Ball follows through with the HST promise — and he says it will be the first priority of his government — it would create another $200-million hole in the government's revenue stream and potentially push the deficit past the $2-billion mark.

The Liberals did anticipate a larger deficit due to low oil prices, and factored that into the financial costing of their election platform.

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But the Liberal numbers were well below this $1.8-billion deficit mark.

This is the number the PCs would have used in their December fiscal update had they held on to power. It would be the largest deficit ever recorded by a wide margin.