WINNIPEG, Manitoba (Reuters) - The Canadian province of Saskatchewan forecast on Tuesday a C$2.6-billion ($2.07 billion)deficit in the current 2021-22 fiscal year, up from last year’s C$1.9 billion, as the pandemic drives up costs. The province, whose economy relies on farming, oil production and mining, is running a larger deficit so it can effectively respond to the COVID-19 crisis, Finance Minister Donna Harpauer said. Canadian provincial governments, like the national government, have run bigger deficits since the pandemic began, trying to slow its spread and buttress economies that lockdowns have hit hard. With government debt rising, credit rating agencies are watching closely for provincial strategies to tame deficits, TD Economics said in a report last month. Saskatchewan expects to continue running deficits until balancing the books in 2026-27, the provincial government said while introducing its new budget. The Saskatchewan Party government, led by Premier Scott Moe, forecast spending to increase by 7% to C$17.1 billion from last year, including costs such as vaccinations, tests for infection and purchases of protective equipment. It forecast provincial revenues for the 2021-22 fiscal year at C$14.5 billion, up nearly 3% from last year. Saskatchewan’s real gross domestic product looks to grow 3.4% in 2021 after contracting 4.2% last year, the government said. The budget assumes an average North American oil futures price of $54.33 per barrel during its fiscal year, generating C$505.1 million in royalties. Neighboring Alberta estimated in February that its 2021-22 budget deficit would shrink to C$18.2 billion, as its economy starts to recover from the coronavirus pandemic.