Montreal, Canada

The province of Saskatchewan has emerged as Canada’s leader in fiscal responsibility. That comes as a surprise to many investors because for years Alberta carried the torch on the heels of a secular energy boom. But Alberta’s fiscal discipline went out the door last year after years of recording surpluses.

Saskatchewan reported a higher than expected budget surplus yesterday, mainly on the heels of strong potash fertilizer and oil prices. Saskatchewan has also emerged as a tar sands player, rivaling Alberta.

Recent bids for potash assets in the province, including Australia’s BHP Billiton and Germany’s K&S, have boosted Saskatchewan’s international image and the lucrative potential of potash in a world facing declining crop yields. Indeed, if the province had its currency it would draw foreign interest.

Saskatchewan raced ahead of Alberta over the past 24 months, harboring a fiscal surplus in 2010-2011 while most other provinces struggle with deepening budget deficits.

The biggest provincial budget deficits in Canada are courtesy of Ontario, Quebec, Alberta, Prince Edward Island and New Brunswick. Saskatchewan leads the pack in the plus column in this fiscal year followed by British Columbia, Newfoundland, Nova Scotia and Manitoba.

Overall, Canada is heading deeper into fiscal deficit this tax year and next due largely to a decline in non-energy exports. The country also harbors a $4.9 billion dollar trade deficit.

If not for the commodities boom, Canada would be in a recession right now. Manufacturing belts in Ontario and Quebec are hurting under the weight of a par-value loonie (Canadian dollar) versus the U.S. dollar and high national unemployment.

But investors still desire Canadian assets. This month, the Russian central bank announced it increased its allocation to the Canadian dollar; China also has plans to boost the loonie in its formidable $2.5 trillion dollar foreign exchange hoard.

As long as the commodities boom continues, the Canuck buck will remain strong.

America’s battered finances also make the Canadian dollar a safer destination for investors south of the border; many individuals are rightly concerned about their relative purchasing power; but compared to gold, the Canadian dollar has been in a decline since 2005.