Volume I - Finance - Government of Newfoundland and Labrador

UNDERSTANDING THE FINANCIAL HEALTH OF THE PROVINCE OF NEWFOUNDLAND AND LABRADOR 27
c) Offshore Royalties as a Percentage of Provincial Revenues
• This ratio measures the Province’s offshore royalty revenues in relation to total provincial
revenues. It reveals the degree to which the Province relies on revenues from offshore royalties as
a source of funding.
• As indicated in the following graph, offshore royalties as a percentage of provincial revenues have
increased significantly since 2006 even with a decrease of 3.3% between 2006 and 2007. This
indicates that the Province continues to rely more on offshore royalties for revenues.
• For the past five years, the average ratio of offshore royalties to provincial revenues is 26.5%. In
2010, the ratio is 36.9%, significantly greater than the five year average. While this ratio is
consistent with 2009, overall the Province is increasingly more dependent on revenues from
offshore royalties; a revenue source which is subject to the volatility of market factors such as the
price of oil.
40
32.8
36.9
36.9
32
Percentage
24
16
14.5
11.2
8
0
2006 2007 2008 2009 2010
FINANCIAL PERFORMANCE
As presented in this report, the Province reported a deficit after four consecutive consolidated surpluses.
The deficit was however, substantially lower than originally budgeted. The recent surpluses along with
investments in the Province’s economy and improved oil prices have better positioned the Province to
weather the global recession and minimize its impacts on the Province’s financial situation. The Province
continues to face challenges to reduce the level of debt and while additional stimulus spending is
necessary, the government must strive to maintain sustainable levels of spending.