Archived - The Fiscal Monitor A publication of the Department of Finance: 2018-03

March 2018: budgetary deficit of $10.6 billion

There was a budgetary deficit of $10.6 billion in March 2018, compared to a budgetary deficit of $10.4 billion reported for March 2017. Revenues increased by $1.6 billion, or 6.5 per cent, reflecting increases in tax revenues and Employment Insurance (EI) premium revenues. Program expenses increased by $1.8 billion, or 5.3 per cent, largely reflecting an increase in direct program expenses. Public debt charges increased by $0.1 billion, or 4.8 per cent.

April 2017 to March 2018: budgetary deficit of $16.2 billion

For the April to March period of the 2017–18 fiscal year, the Government posted a budgetary deficit of $16.2 billion, compared to a deficit of $21.8 billion reported for the same period of 2016–17. Revenues were up $15.7 billion, or 5.4 per cent, reflecting increases in tax revenues and other revenues, partially offset by a decrease in EI premium revenues. Program expenses increased by $10.1 billion, or 3.5 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $43 million, or 0.2 per cent.

The April 2017 to March 2018 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. In addition, these results do not include the $4.2-billion fiscal impact of the Government's initiative to enhance veterans' benefits. Taking year-end adjustments into account, results to date are broadly in line with a $19.4-billion deficit projected in Budget 2018 for 2017–18.

The Government will release the final audited outcome for 2017–18 in the Annual Financial Report of the Government of Canada in the fall.

There was a budgetary deficit of $10.6 billion in March 2018, compared to a deficit of $10.4 billion in March 2017.

Revenues in March 2018 totalled $26.7 billion, up $1.6 billion from March 2017.

• Personal income tax revenues were up $0.4 billion, or 3.8 per cent.
• Corporate income tax revenues were up $0.4 billion, or 9.1 per cent.
• Non-resident income tax revenues were up $0.4 billion, or 185.6 per cent.
• Excise taxes and duties were up $0.2 billion, or 6.8 per cent. Goods and Services Tax (GST) revenues increased by $0.4 billion, energy taxes decreased by $7 million, customs import duties decreased by $36 million, and other excise taxes and duties decreased by $0.1 billion.
• EI premium revenues were up $0.2 billion, or 9.2 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 $36 million, or 1.2 per cent.

Program expenses in March 2018 were $34.9 billion, up $1.8 billion, or 5.3 per cent, from March 2017.

• Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $39 million, or 0.5 per cent. Elderly benefits increased by $0.3 billion, or 6.7 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $0.2 billion, or 11.4 per cent. Children's benefits decreased by $28 million, or 1.4 per cent.
• Major transfers to other levels of government consist of federal transfers in support of health and other social programs (the Canada Health Transfer, the Canada Social Transfer, and the new home care and mental health transfers announced in Budget 2017), 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 decreased by $0.1 billion, or 1.1 per cent.
• 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 consolidated Crown corporations. Direct program expenses were up $1.8 billion, or 9.2 per cent. Within direct program expenses:
  • Transfer payments increased by $3.0 billion, or 42.4 per cent, largely reflecting an increase in transfers to First Nations, as well as a year-over-year difference in the timing of infrastructure transfers.
  • Other direct program expenses decreased by $1.2 billion, or 9.5 per cent, reflecting decreases in consolidated Crown corporation expenses and operating expenses of departments.

Public debt charges increased by $0.1 billion, or 4.8 per cent, due mainly to a higher average effective interest rate on the stock of interest-bearing debt.

For the April to March period of the 2017–18 fiscal year, there was a budgetary deficit of $16.2 billion, compared to a deficit of $21.8 billion reported during the same period of 2016–17.

Revenues increased by $15.7 billion, or 5.4 per cent, to $305.9 billion.

• Personal income tax revenues were up $8.1 billion, or 5.9 per cent.
• Corporate income tax revenues were up $4.2 billion, or 9.7 per cent.
• Non-resident income tax revenues were up $1.2 billion, or 16.8 per cent.
• Excise taxes and duties were up $2.9 billion, or 5.7 per cent. GST revenues were up $2.7 billion, energy taxes increased by $0.2 billion, customs import duties decreased by $25 million, and other excise taxes and duties increased by $0.1 billion.
• EI premium revenues were down $1.3 billion, or 5.9 per cent, reflecting a decline in the premium rate as a result of the seven-year break-even mechanism introduced in 2017.
• Other revenues were up $0.5 billion, or 2.0 per cent.

Program expenses totalled $297.8 billion over the April to March period of 2017–18, up $10.1 billion, or 3.5 per cent, from the same period the previous year.

• Major transfers to persons were up $3.0 billion, or 3.2 per cent. Elderly benefits increased by $2.7 billion, or 5.5 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $1.1 billion, or 5.1 per cent. Children's benefits were up $1.4 billion, or 6.2 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 were up $1.9 billion, or 2.7 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, as well as payments under the new home care and mental health transfers.
• Direct program expenses were up $5.3 billion, or 4.1 per cent. Within direct program expenses:
  • Transfer payments increased by $3.4 billion, or 8.2 per cent, reflecting increases across a number of departments, in particular increased transfers to First Nations.
  • Other direct program expenses increased by $1.9 billion, or 2.2 per cent, largely reflecting increases in operating expenses of National Defence.

Public debt charges decreased by $43 million, or 0.2 per cent.

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 $16.2 billion and a financial source of $10.0 billion from non-budgetary transactions, there was a financial requirement of $6.2 billion for the April 2017 to March 2018 period, compared to a financial requirement of $25.7 billion for the same period the previous year.

The Government financed its financial requirement of $6.2 billion and increased cash balances by $0.8 billion by increasing unmatured debt by $6.9 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 2018 stood at $37.7 billion, up $0.8 billion from their level at the end of March 2017.

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 2018