Caroline Wawzonek: 2025-2026 Fall Economic and Fiscal Update

October 17, 2025

Check against delivery

Mr. Speaker, thank you for this opportunity to provide the Legislative Assembly with the fall economic and fiscal update. This statement will describe the changes that have happened since Budget 2025 was released, review the supplementary appropriations to date for 2025-2026, and outline how we are revising our fiscal strategy goals to better match the uncertain economic times we find ourselves in.

2025 has again been marked by notable natural disasters which were a major focus for many residents and workers over the past few months. The year is not over and still there are active wildfires across the territory. More specifically, residents in Fort Providence and Whatì had to evacuate in late August and the Tthets’éhk’édélı̨ First Nation was under evacuation alert for a short period.

The wider Canadian economy alongside much of the world’s geopolitical situation are facing times of notable uncertainty. The United States is the largest economy in the world and remains under a state of rolling tariff changes that reverberate through the world. For the territory, the private sector remains highly dependent on a single resource commodity, which makes us particularly vulnerable to international market and consumer demand swings.

In response to the level of ongoing uncertainty, we are modifying our fiscal strategy. The previous fiscal strategy aspired to increase operating budgets through a combination of new revenue generation and expenditure management to decrease short-term debt and increase fiscal capacity so that the GNWT could continue to respond to expenditure shocks. Unfortunately, significant economic disruptions were upon us even sooner than anticipated.

We will be responsive by investing in the stability and resilience of the territory. While these goals will increase debt, we are careful to ensure debt remains affordable and that these investments provide long-term economic benefits.

The federal government granted us a borrowing limit increase in March 2025. With this higher borrowing limit, we gained $1.3 billion in flexibility to respond to new challenges and continue investment in public infrastructure. To be clear, increased borrowing does not mean increased revenue. To make an analogy, our credit card limit has increased, but our income has not. We remain committed to stay within the guardrails of the Fiscal Responsibility Policy to restrain the rate of debt accumulation. Even with a shifting of our formal fiscal strategy, fiscal responsibility and sustainability remain key pillars for the GNWT. We will continue to expect good value in all programs and services, keep a close eye on public sector growth, and seek innovative paths forward to find efficiencies.

The dominance of the diamond mining industry over the past few decades makes the territorial economy especially sensitive to the shifting tides of global markets. In recent months, new hurdles have emerged. American import tariffs have added uncertainty for markets, particularly in mining and other resource and trade dependent industries.

Earlier this year, the Government of the Northwest Territories provided targeted support measures to the diamond mines, including temporary tax relief and operational assistance. This support does not change the reality that the planned closure dates of the mines are already upon us. The recent tariffs and market demand volatility reminds us of the vulnerability of our economy and the dependence for contracts many businesses associated to the mines rely on. We must continue to reduce barriers to speed up new investment and encourage a more diversified private sector.

Declining diamond production, slow to no growth in private investment, and housing shortages continue to weigh on the economic outlook. Public and private sector employment have remained relatively steady. Wages have grown in mining and public administration but are flat in other key sectors. Inflation has eased, offering relief to households, and total active businesses has recovered to pre-pandemic averages.

The economy does not stand still. It continually evolves in response to changing human and social dynamics that surround us. I have long said that I remain optimistic for the Northwest Territories’ potential future and that remains true now in particular with changes coming on the national landscape.

The federal government is looking north and seems to be sincerely hearing the calls from leaders across the Territories to deal with the lack of connections in and between 40 per cent of Canada’s landmass. This is a challenge to our sovereignty that all of Canada should be aware of; but investing in true nation building by looking towards the Arctic can build Canada into the northern, Arctic leader that many Canadians see ourselves as.

The Arctic Economic and Security Corridor is already on the list of nation-building projects, and there is continued interest in the Mackenzie Valley Highway as the Department of Defense has invested significant resources to upgrade the Inuvik airport as a future forward operating location. In addition, energy connections broadly remain a strategic focus, including projects like Taltson, as does the critical minerals sector where the NWT has several advanced opportunities.

Emerging Fiscal Pressures Since 2025-2026 Budget

Mr. Speaker, we started this fiscal year with a projected operating surplus at $170 million. Consistent with the previous fiscal strategy of Restoring Balance, this represented enough of a cash surplus to fully pay for the 2025-2026 capital budget without additional borrowing.

We are now projecting an operating surplus of $16 million. This $154-million decline in our operating balance takes into account the two supplementary appropriations prepared and year end expenditure projections.

Approved supplementary spending to date this year is $47 million that comes with $38 million of federal support, for a net total of $9 million of new spending compared to Budget 2025. Among the new spending, higher salaries for educators required $2 million under the School Funding Framework. Transitional housing and shelter services, harbour restoration in Hay River, and contributions to physical activity, sport and recreation were each approved for $1.8 million in supplementary support. Aurora College was approved for $528,000 for the Practical Nurse training program. The Yellowknife Courthouse will receive $246,000 for approved security improvements, including a new sheriff position and other upgrades.

The second supplementary funding process totals $87 million with $15 million of offsetting support. The proposed new spending is primarily focused on three measures: additional wildfire suppression costs, funding to education bodies to assist with the loss of Jordan’s Principle funding, and further subsidies to shield ratepayers from electricity price spikes stemming from low water levels. It also includes funding for disaster response and recovery and continuing fish plant operations in Hay River.

Mr. Speaker, 2025-2026 infrastructure budgets have also increased. So far this year, the Legislative Assembly has approved supplementary capital budgets of $179 million, which includes $113 million in offsetting revenue, either federal funding or carryover from the previous year, for a net increase to the capital budget of $65 million. Most of the increase was for the first year of a new three-year annual $42‑million housing investment commitment after Budget 2025 was released, and this investment reflects an emphasis on mandate priorities that include suitable, accessible and affordable housing.

Taking all these factors into account, we now expect to close the fiscal year with $840 million in short-term borrowing. This will bring our total debt to $1.862 billion, which is an increase of $90 million compared to the original Budget 2025 projection.

A Revised Fiscal Strategy

Keeping our own fiscal house in order remains essential, but our progress towards meeting our original fiscal goals has been hindered by rising expenditure pressures and significant economic and geopolitical uncertainty. Revising the fiscal strategy to enable strategic investments that foster opportunity and stability for Northerners is essential amid challenging times.

Revising the fiscal strategy is also allowing more time to complete the work we started to find the best fiscal foundation for a sustainable health care system. We are allowing the time needed for the Healthcare System Sustainability Unit and the Northwest Territories Health and Social Services Authority Public Administrator to complete their work, while not sacrificing patient care.  We are looking forward to the outcome of this work being incorporated into the 2027-2028 business planning process.

Despite the revised fiscal strategy direction, I am reaffirming the GNWT’s commitment to the Fiscal Responsibility Policy guidelines that keep debt affordable and within the borrowing limit. With that continued guidepost, we are maintaining a balance between more fiscal flexibility but still mindful of the need for restraint in the face of slow revenue growth.

Conclusion

Mr. Speaker, the Government of the Northwest Territories sees the challenges we face as opportunities to support an economy in transition. We remain committed to long-term sustainability, but our near-term focus must be on stability and resilience. With continued federal partnership, a continued focus on efficiency, and a commitment to maximizing Northern benefits, we are creating the conditions for a stronger, more diversified economy.

Thank you, Mr. Speaker.

NT5