The Nunavut government is boosting the price of fuel to help prevent the territory from sinking deeper into deficit, Finance Minister David Simailak announced Tuesday.

Speaking at the start of a new legislative session, Simailak told MLAs that he is expecting a deficit of more than $7 million this year. Without the money from a fuel price increase, that deficit could have risen to $12 million, he added.

Simailak blamed rising oil prices in part for the deficit, since the government heavily subsidizes the price of fuel in the territory.

As of Nov. 1, the retail price of gasoline will jump by 10 cents a litre, and aviation fuel will cost 20 cents a litre more. Those increases do not include the GST. The cost of diesel products, used mainly for heating, will remain the same.

Simailak said that if the government wanted to recover the full cost of this year's fuel supplies, it would have to hike the price of all fuel products by 25 cents a litre.

And despite the deficit, Simailak stressed that services in Nunavut will not be affected.

"We are not contemplating any program cuts or staff cuts or any cuts of any kind at this point," he said Tuesday.

But Cambridge Bay MLA Keith Peterson said the government is clearly in a financial bind.

"There's so many pressing demands in Nunavut just to get facilities, to get programs and services to people," he said. "Whether we can keep up with all that demand is something that remains to be seen."

'Borrowing' $9M from heritage centre project

Simailak also announced the government is taking back $9 million of the $10 million set aside for a proposed Nunavut heritage centre, saying the government needs that money elsewhere.

"We needed a bit more money for the rest of our capital projects, and the heritage centre building is something that's not fully funded yet," he said. "We still have to try to find the rest of the money that we need for that so we're borrowing … $9 million from that project for now."

Some of the other capital projects the government wants to fund include a trades school in Rankin Inlet, a folk school and a new territorial jail. Peterson questioned whether the government has taken on more projects than what it can handle.

"The way things are going, where are we going to get the funding for all of these large capital projects?" he asked.

Tuesday's move leaves only $1 million in the government's budget for the Iqaluit-based heritage facility, which would house the territory's artifacts and archives. Many of those items are currently housed at the Prince of Wales Northern Heritage Centre in Yellowknife, where they've been stored since before Nunavut became its own territory in 1999.

The government is currently paying the Yellowknife-based centre rent for the storage, but the centre has served notice that the items will have to be moved one day.

The Nunavut government, Nunavut Tunngavik Inc., and the Inuit Heritage Trust have been working together to create the centre, and are currently trying to secure the federal government as a key player.