Mr. Speaker, on April 22, 2015, the federal government announced a $500 million increase to the GNWT borrowing limit, bringing the federally imposed borrowing limit to $1.3 billion as well the definition of self-financing debt is being revised. Post devolution this increase in our borrowing limit gives the Government of the Northwest Territories increased flexibility to invest, in consultation with Members of the Legislative Assembly, in much-needed infrastructure that will support the responsible development of the NWT and its economy and bring down the cost of living for communities and residents. The federal government has recognized both the positive economic outlook for the territory and our disciplined fiscal management that this increase represents.
We, as an assembly, must remain vigilant. As Members will recall, one of the more important fiscal planning principles adopted at the start of the 17th Assembly, was ensuring the Government had the fiscal capacity to respond to revenue shocks and in-year expenditure pressures by maintaining at least $100 million in borrowing authority at the end of the 17th Legislative Assembly.
The Government will continue to face flat revenue growth and expenditures pressures due to low water levels, health and forest firefighting costs during the 18th Assembly. To ensure we maintain the fiscal discipline required to be able to respond to these issues even with the added borrowing room, the fiscal strategy will be revised to ensure that at least $160 million in borrowing authority is retained going into the 18th Assembly. This will provide sufficient flexibility to allow the 18th Assembly to undertake targeted projects, and participate in the Build Canada Plan and other critical projects like Stanton Territorial Hospital Renewal while also providing the financial capacity to respond to any further one-time revenue or expenditure shocks.
Mr. Speaker, the increase to the borrowing limit does not however address the fiscal issues facing the Government. Over the next five years, revenues are forecasted to be flat growing by only 0.44% over the next four years or about 0.1% per year. There are limited options available to raise revenues from own sources in the short term, without impacting the cost of living or curtailing our economic growth potential. Furthermore, if the increased borrowing limit is used to enhance programs and services through our Operations and Maintenance budget, the GNWT may be forced to cut spending in other areas in order to finance the debt service payments associated with this debt.
It is therefore important to start thinking about the fiscal parameters to guide the development of the fiscal strategy to be considered by the 18th Legislative Assembly. This includes linking net operations and maintenance expenditure growth with the growth in the Territorial Formula Financing Grant. This will likely require the Government to undertake reductions to operating expenditures to ensure we can continue to finance at least 50 percent of our capital expenditures with operating surpluses and start to return the Government to a cash surplus position.
As we move into 2015, there are signs that some parts of the NWT economy are beginning a modest recovery from the financial and economic crisis, but our current real Gross Domestic Product remains 25% below its pre-recession peak in 2007.
More importantly, Mr. Speaker, the NWT has experienced no population growth for several years. We have initiated steps to address this trend and start growing the NWT population. We will continue to pursue our population growth strategy to increase the NWT population and work with the mining industry and other business sectors to encourage rotational non-resident workers to reside in the NWT.
Till these efforts show success our fiscal capacity will continue to be vulnerable due to declining revenues from Canada under Territorial Formula Financing.
An adequate borrowing limit based on affordability, while critical, will not mean the fiscal challenges of this Assembly or the next will disappear.
Even though the increased limit allows us to invest in key infrastructure priorities, we still need to maintain control of expenditures to adhere to the Fiscal Responsibility Policy and maintain a fiscally sustainable operation. This government secured an increase in our borrowing limit and we have begun planning on potential projects to responsibly increase economic growth and attract investment and people to our territory. The final decision on what projects to invest in to secure our economic future belongs to the 18th Legislative Assembly.
Our fiscal challenges are not unique and we will not be shrinking from them. Recognizing our reality prepares us for the tough choices we will have to make now and in the future.
Thank you Mr. Speaker.