Archived - The Fiscal Monitor A publication of the Department of Finance: 2017-03

March 2017: budgetary deficit of $10.4 billion

There was a budgetary deficit of $10.4 billion in March 2017, compared to a budgetary deficit of $9.4 billion reported for March 2016. Revenues increased by $1.0 billion, or 4.2 per cent, as higher tax revenues were partially offset by lower Employment Insurance (EI) premium revenues and other revenues. Program expenses increased by $1.7 billion, or 5.3 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges increased by $0.3 billion, or 14.2 per cent, reflecting higher Consumer Price Index adjustments on Real Return Bonds.

April 2016 to March 2017: budgetary deficit of $21.8 billion

For the April to March period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $21.8 billion, compared to a deficit of $2.0 billion reported for the same period of 2015–16. Revenues were up $0.6 billion, or 0.2 per cent, as higher tax revenues were partially offset by lower EI premium revenues and other revenues. Program expenses increased by $21.7 billion, or 8.2 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $1.2 billion, or 4.7 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

The April 2016 to March 2017 monthly results are not the final results for the year as a whole. The final results will also reflect end-of-year adjustments that will be made once further information becomes available, including the accrual of tax revenues reflecting assessments of tax returns. Taking year-end adjustments into account, results to date are broadly in line with a $23.0-billion deficit in 2016–17, as projected in Budget 2017.

The Government will release the final audited outcome for 2016–17 in the Annual Financial Report of the Government of Canada in the fall.

There was a budgetary deficit of $10.4 billion in March 2017, compared to a deficit of $9.4 billion in March 2016.

Revenues in March 2017 totalled $25.1 billion, up $1.0 billion from March 2016.

• Personal income tax revenues were up $1.2 billion, or 11.9 per cent.
• Corporate income tax revenues were up $0.8 billion, or 21.9 per cent.
• Non-resident income tax revenues were down $0.3 billion, or 59.9 per cent.
• Excise taxes and duties were down $0.1 billion, or 3.2 per cent. Goods and Services Tax (GST) revenues decreased by $0.3 billion, energy taxes increased by $23 million, customs import duties decreased by $24 million, and other excise taxes and duties increased by $0.1 billion.
• EI premium revenues were down $20 million, or 0.9 per cent.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were down $0.6 billion, or 16.8 per cent, reflecting lower revenues from Crown corporations and lower interest and penalties revenues.

Program expenses in March 2017 were $33.2 billion, up $1.7 billion, or 5.3 per cent, from March 2016.

• Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.9 billion, or 13.5 per cent. Elderly benefits increased by $0.2 billion, or 5.7 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.2 billion, or 14.8 per cent. Children's benefits increased by $0.5 billion, or 32.1 per cent, reflecting the new Canada Child Benefit, which replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016.
• Major transfers to other levels of government consist of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada's cities and communities, and the Quebec Abatement. Major transfers to other levels of government increased by $0.3 billion, or 5.1 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization transfers.
• Direct program expenses include transfer payments to individuals and organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of operating expenses of National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $0.5 billion, or 2.4 per cent. Within direct program expenses:
  • Transfer payments decreased by $0.1 billion, or 1.4 per cent.
  • Other direct program expenses increased by $0.6 billion, or 4.6 per cent, reflecting an increase in Crown corporation expenses and an increase in year-end valuation adjustments for assets and liabilities.

Public debt charges increased by $0.3 billion, or 14.2 per cent, reflecting higher Consumer Price Index adjustments on Real Return Bonds.

For the April to March period of the 2016–17 fiscal year, there was a budgetary deficit of $21.8 billion, compared to a deficit of $2.0 billion reported during the same period of 2015–16.

Revenues increased by $0.6 billion, or 0.2 per cent, to $290.2 billion.

• Personal income tax revenues were up $0.3 billion, or 0.2 per cent.
• Corporate income tax revenues were up $2.3 billion, or 5.4 per cent.
• Non-resident income tax revenues were up $0.5 billion, or 8.2 per cent.
• Excise taxes and duties were up $0.5 billion, or 1.1 per cent. GST revenues were up $0.6 billion, energy taxes and other excise taxes and duties were both down $0.1 billion, and customs import duties were up $0.1 billion.
• EI premium revenues were down $0.4 billion, or 1.8 per cent.
• Other revenues were down $2.5 billion, or 8.4 per cent. This decline largely reflects the $2.1-billion gain realized on the sale of the Government's remaining holdings of General Motors common shares in April 2015.

Program expenses totalled $287.7 billion, up $21.7 billion, or 8.2 per cent, from the same period the previous year.

• Major transfers to persons were up $8.3 billion, or 10.0 per cent. Elderly benefits increased by $2.7 billion, or 5.9 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $1.4 billion, or 7.4 per cent, and children's benefits were up $4.2 billion, or 23.2 per cent, largely reflecting the new Canada Child Benefit.
• Major transfers to other levels of government were up $2.8 billion, or 4.3 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses were up $10.6 billion, or 9.1 per cent. Within direct program expenses:
  • Transfer payments increased by $6.0 billion, or 16.9 per cent, reflecting a number of factors including the accelerated repayment of contributions by Pratt & Whitney Canada in 2015–16, which decreased transfer payments in that year, as well as increased transfers in the current year related to claims and infrastructure spending.
  • Other direct program expenses increased by $4.7 billion, or 5.7 per cent, largely reflecting increases in Crown corporation expenses and increases in pension and other employee future benefit expenses based on the Government's latest actuarial valuations.

Public debt charges decreased by $1.2 billion, or 4.7 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government's investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary deficit of $21.8 billion and a financial requirement of $3.9 billion from non-budgetary transactions, there was a financial requirement of $25.7 billion for the April 2016 to March 2017 period, compared to a financial requirement of $12.6 billion for the same period the previous year.

The Government financed its financial requirement of $25.7 billion by decreasing cash balances by $0.9 billion and increasing unmatured debt by $24.8 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds.

The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of March 2017 stood at $36.9 billion, down $0.9 billion from their level at the end of March 2016.

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

For inquiries about this publication, contact Bradley Recker at 613-369-5667.

May 2017