Archived - The Fiscal Monitor A publication of the Department of Finance: 2016-09

September 2016: budgetary deficit of $2.4 billion

There was a budgetary deficit of $2.4 billion in September 2016, compared to a deficit of $1.2 billion in September 2015. Revenues decreased by $0.3 billion, or 1.5 per cent, as decreases in revenues from corporate income tax, non-resident income tax and excise taxes and duties were only partially offset by increases in other revenue streams. Program expenses were up $1.0 billion, or 4.8 per cent, due to increases in major transfers to persons and other levels of government. Public debt charges decreased by $0.2 billion, or 11.3 per cent, reflecting lower consumer price adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

April to September 2016: budgetary deficit of $7.8 billion

For the April to September 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $7.8 billion, compared to a surplus of $1.6 billion reported in the same period of 2015–16. Revenues were down $1.9 billion, or 1.3 per cent, largely as a result of decreases in other revenues and excise taxes and duties. Program expenses were up $8.9 billion, or 7.0 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $1.4 billion, or 9.8 per cent, largely due to a lower average effective interest rate on the stock of interest-bearing debt.

There was a budgetary deficit of $2.4 billion in September 2016, compared to a deficit of $1.2 billion in September 2015.

Revenues in September 2016 totalled $21.7 billion, down $0.3 billion, or 1.5 per cent, from September 2015.

• Personal income tax revenues were up $0.3 billion, or 2.7 per cent.
• Corporate income tax revenues were down $0.4 billion, or 11.7 per cent.
• Non-resident income tax revenues were down $0.2 billion, or 31.1 per cent.
• Excise taxes and duties were down $0.1 billion, or 2.2 per cent. Goods and Services Tax (GST) revenues decreased by $12 million. Energy taxes decreased by $3 million, customs import duties decreased by $24 million, and other excise taxes and duties decreased by $0.1 billion.
• Employment Insurance (EI) premium revenues were up $16 million, or 1.2 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 up $0.1 billion, or 2.4 per cent.

Program expenses in September 2016 were $22.2 billion, up $1.0 billion, or 4.8 per cent, from September 2015.

• Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.9 billion, or 14.1 per cent. Elderly benefits increased by $0.3 billion, or 6.9 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 14.1 per cent. Children's benefits increased by $0.5 billion, or 31.9 per cent, reflecting the new Canada Child Benefit, which has 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 $0.2 billion, or 2.9 per cent, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses include transfer payments to individuals and other 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 down $0.1 billion, or 0.7 per cent. Within direct program expenses:
  • Transfer payments decreased by $0.6 billion, or 19.2 per cent, largely reflecting a decrease in the Government's liability for disaster assistance in the current year based on revised cost estimates.
  • Other direct program expenses increased by $0.5 billion, or 7.9 per cent, due mainly to an increase in pension and other employee and veteran future benefit expenses based on the Government's latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges decreased by $0.2 billion, or 11.3 per cent, reflecting lower consumer price adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

For the April to September 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $7.8 billion, compared to a surplus of $1.6 billion reported in the same period of 2015–16.

Revenues decreased by $1.9 billion, or 1.3 per cent, to $139.4 billion.

• Personal income tax revenues were up $0.5 billion, or 0.7 per cent.
• Corporate income tax revenues were down $0.1 billion, or 0.6 per cent.
• Non-resident income tax revenues were down $0.3 billion, or 8.9 per cent.
• Excise taxes and duties were down $0.7 billion, or 2.8 per cent. GST revenues were down $0.5 billion, or 3.0 per cent. Customs import duties were down $14 million, and energy taxes and other excise taxes and duties were each down $0.1 billion.
• EI premium revenues were up $0.2 billion, or 1.6 per cent, reflecting growth in earnings.
• Other revenues were down $1.4 billion, or 9.1 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, offset in part by growth in other components in the current year, including interest and penalties revenues.

For the April to September 2016 period, program expenses were $134.7 billion, up $8.9 billion, or 7.0 per cent, from the same period the previous year.

• Major transfers to persons were up $3.2 billion, or 7.9 per cent. Elderly benefits increased by $1.2 billion, or 5.3 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.7 billion, or 7.0 per cent. Children's benefits were up $1.4 billion, or 15.4 per cent, largely reflecting the new Canada Child Benefit.
• Major transfers to other levels of government were up $1.5 billion, or 4.7 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 $4.1 billion, or 7.8 per cent. Within direct program expenses:
  • Transfer payments increased by $1.6 billion, or 10.6 per cent, reflecting increases across several departments, including the accrual of liabilities for disaster assistance, claims expenses and increased funding of new and existing programs.
  • Other direct program expenses increased by $2.5 billion, or 6.7 per cent, due in large part to an increase in pension and other employee and veteran future benefit expenses based on the Government's latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges were down $1.4 billion, or 9.8 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 $7.8 billion and a requirement of $12.6 billion from non-budgetary transactions, there was a financial requirement of $20.4 billion for the April to September 2016 period, compared to a financial requirement of $15.3 billion for the same period the previous year.

The Government financed this financial requirement of $20.4 billion and increased cash balances by $3.7 billion by increasing unmatured debt by $24.2 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds and treasury bills.

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 September 2016 stood at $41.6 billion, up $3.1 billion from their level at the end of September 2015.

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.

November 2016