To help narrow the deficit, the province raised its capital tax on banks and other lenders to 6 percent from 5 percent, making it the highest such rate among provinces and generating C$25.5 million this fiscal year.

"We've decided the big banks could afford to make a contribution to tax relief in other areas,” such as small business taxes, said Finance Minister Greg Dewar.

Manitoba, a flood-prone province whose economy depends on farming, manufacturing and mining, projected spending at C$15.5 billion, up 1.9 percent from 2014-15.

Revenue looks to edge 1.2 percent higher to nearly C$15 billion. The budget includes a C$150 million favorable adjustment expected from an in-year increase in revenue or decrease in spending.

The left-leaning New Democratic Party (NDP) government has been in power since 1999 and is led by Premier Greg Selinger. In March, Selinger narrowly survived a revolt by restless party members, including some cabinet ministers.

The party trails the opposition Progressive Conservatives in polls by a wide margin.

The government said earlier that it will balance its budget by the 2018-19 fiscal year, two years later than it previously intended.

Manitoba's economy looks to outperform the national average in the next two years as manufacturing accelerates with help from the lower Canadian dollar, a TD Economics report said earlier this month.

The province's net debt, not including government-owned corporations such as its power company, was an estimated C$18.8 billion on March 31, and is expected to rise to C$20.4 billion a year later.

Most Canadian provinces have run deficits for several years after the 2008-2009 financial crisis slowed the economy. Last week, Ontario forecast an C$8.5 billion deficit and said it aimed to balance the books by 2017-2018.

(Editing by G Crosse, Jeffrey Hodgson and Ted Botha)

By Rod Nickel