Archived - The Fiscal Monitor - March 2020

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Highlights

Note: Due to extensions in financial reporting timelines for government departments and agencies in connection with COVID-19, the March 2020 Fiscal Monitor does not include year-end accrual adjustments, which were included in the March 2019 results presented for comparative purposes in this document. Year-end adjustments for 2019–20 will be reflected in the Public Accounts of Canada 2020, to be tabled in Parliament later this year.

March 2020

There was a budgetary deficit of $14.8 billion in March 2020, compared to a deficit of $14.9 billion in March 2019. Revenues decreased by $2.0 billion, or 7.2%, reflecting decreases in tax revenues and other revenues. Program expenses decreased by $2.7 billion, or 6.6%, primarily reflecting lower direct program expenses. Public debt charges increased by $0.6 billion, or 28.9%, largely reflecting expenses from multiple bond buyback operations held in March 2020, which did not occur in March 2019, as well as higher Consumer Price Index adjustments on Real Return Bonds.

Monthly budgetary balance

April 2019 to March 2020

For the April to March period of the 2019–20 fiscal year, the government posted a budgetary deficit of $21.8 billion, compared to a deficit of $11.8 billion reported for the same period of 2018–19.

Revenues were up $6.0 billion, or 1.8%, largely reflecting increases in personal income tax revenues and fuel charge proceeds. Program expenses were up $14.8 billion, or 4.7%, reflecting increases in major transfers to persons, major transfers to other levels of government and direct program expenses. Public debt charges increased by $1.2 billion, or 5.1%, largely reflecting higher Consumer Price Index adjustments on Real Return Bonds and a higher average effective interest rate on the stock of Government of Canada treasury bills.

Year-to-date budgetary balance

Revenues

Revenues in March 2020 totalled $25.8 billion, down $2.0 billion, or 7.2%, from March 2019.            

• Tax revenues decreased by $1.3 billion, or 6.1%.
• Fuel charge proceeds assessed under the federal carbon pollution pricing system totalled $0.3 billion.
• Employment Insurance (EI) premium revenues increased by $0.2 billion, or 7.0%.
• 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 $1.2 billion, or 34.0%.

For the April to March period of 2019–20, revenues were $334.3 billion, up $6.0 billion, or 1.8%, from the same period the previous year.

• Tax revenues increased by $5.2 billion, or 2.4%, driven largely by growth in personal income tax revenues. The increase in tax revenues for the April to March period includes $32 million from the federal portion of assessed cannabis excise duties.
• Assessed fuel charge proceeds totalled $2.0 billion over the period.
• EI premium revenues were up $0.8 billion, or 3.4%. 
• Other revenues were up $0.1 billion, or 0.2%.

Expenses

Program expenses in March 2020 were $38.0 billion, down $2.7 billion, or 6.6%, from March 2019. 

• Major transfers to persons, consisting of elderly, EI and children’s benefits, were up $0.9 billion, or 11.4%. Elderly benefits increased by $0.2 billion, or 4.4%, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefits increased by $0.6 billion, or 37.7%. Children’s benefits were up $0.1 billion, or 5.7%.
• Major transfers to other levels of government were up $0.1 billion, or 2.1%, reflecting a $0.5-billion transfer to provinces and territories for public health preparedness, critical health care system needs and to support mitigation efforts associated with COVID-19, as well as legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories. These increases were offset in part by a decrease in transfers for home care and mental health, due to year over year timing differences, and an increase in recoveries under the Quebec Abatement.
• Direct program expenses were down $3.8 billion, or 14.5%. Within direct program expenses:
  • Fuel charge proceeds returned were up $0.5 billion, reflecting the introduction of the new federal carbon pollution pricing system on January 1, 2019.
  • Other transfer payments decreased by $3.7 billion, or 30.7%, largely reflecting the inclusion of year-end accrual adjustments in the previous year. 
  • Other direct program expenses, consisting of operating expenses of the government’s departments, agencies, and consolidated Crown corporations and other entities, decreased by $0.5 billion, or 4.1%.

Public debt charges increased by $0.6 billion, or 28.9%, largely reflecting expenses from multiple bond buyback operations held in March 2020, which did not occur in March 2019, as well as higher Consumer Price Index adjustments on Real Return Bonds.

For the April to March period of 2019–20, program expenses were $331.4 billion, up $14.8 billion, or 4.7%, from the same period the previous year.

• Major transfers to persons were up $4.4 billion, or 4.6%. Elderly benefits increased by $2.7 billion, or 5.1%, reflecting growth in the elderly population and changes in consumer prices. EI benefits increased by $1.3 billion, or 6.7%. Children’s benefits were up $0.5 billion, or 2.0%.
• Major transfers to other levels of government were up $5.0 billion, or 6.8%, primarily reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories; a $0.5-billion transfer to provinces and territories for public health preparedness, critical health care system needs and to support mitigation efforts associated with COVID-19; an increase in payments under home care and mental health transfers; and, $1.9 billion in transfers under the new Hibernia Dividend Backed Annuity Agreement reached on April 1, 2019 between Canada and Newfoundland and Labrador.
• Direct program expenses were up $5.4 billion, or 3.7%. Within direct program expenses:
  • Fuel charge proceeds returned increased by $1.9 billion.
  • Other transfer payments decreased by $2.0 billion, or 3.9%.
  • Other direct program expenses increased by $5.4 billion, or 5.6%, due in large part to an increase in personnel costs.

Public debt charges increased by $1.2 billion, or 5.1%, largely reflecting higher Consumer Price Index adjustments on Real Return Bonds and a higher average effective interest rate on the stock of Government of Canada treasury bills.

The following table presents total expenses by main object of expense.

Revenues and expenses (April 2019 to March 2020)

Financial requirement of $42.3 billion for April 2019 to March 2020

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 requirement of $20.5 billion from non-budgetary transactions, there was a financial requirement of $42.3 billion for the April 2019 to March 2020 period, compared to a financial requirement of $12.3 billion for the same period the previous year.

Net financing activities up $46.9 billion

The government financed this financial requirement of $42.3 billion and increased cash balances by $4.6 billion by increasing unmatured debt by $46.9 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 March 2020 stood at $44.7 billion, up $4.6 billion from their level at the end of March 2019. 

Federal debt

The federal debt, or accumulated deficit, is the difference between the government’s total liabilities and total assets. The year-over-year change in the accumulated deficit reflects the year-to-date budgetary balance plus other comprehensive income or loss. Other comprehensive income or loss represents certain unrealized gains and losses on financial instruments and certain actuarial gains and losses related to pensions and other employee future benefits reported by enterprise Crown corporations and other government business enterprises. 

The accumulated deficit increased by $18.7 billion over the April 2019 to March 2020 period, reflecting the $21.8 billion budgetary deficit, offset in part by $3.1 billion in other comprehensive income.

Notes

1. The Fiscal Monitor is a report on the consolidated financial results of the Government of Canada, prepared monthly by the Department of Finance Canada. The government is committed to releasing The Fiscal Monitor on a timely basis in accordance with the International Monetary Fund’s Special Data Dissemination Standard Plus, which is designed to promote member countries’ data transparency and promote the development of sound statistical systems.
2. The financial results reported in The Fiscal Monitor are drawn from the accounts of Canada, which are maintained by the Receiver General and used to prepare the annual Public Accounts of Canada.
3. The Fiscal Monitor is generally prepared in accordance with the same accounting policies as used to prepare the government’s annual consolidated financial statements, which are summarized in Section 2 of Volume I of the Public Accounts of Canada, available through the Public Services and Procurement Canada website.
4. The financial results presented in The Fiscal Monitor have not been audited or reviewed by an external auditor.
5. There can be substantial volatility in monthly results due to the timing of revenue receipts and expense recognition. For instance, a large share of government spending is typically reported in the March Fiscal Monitor.
6. The April to March results reported in The Fiscal Monitor are not the final results for the fiscal year as a whole. The final results are published in the annual Public Accounts of Canada and incorporate post-March end-of-year adjustments made once further information becomes available, including the accrual of tax revenues reflecting assessments of tax returns and valuation adjustments for assets and liabilities. Post-March adjustments may also include the accrual of measures announced in the budget that are recorded upon receipt of Royal Assent of enabling legislation.
7. A Condensed Statement of Assets and Liabilities is included in the monthly Fiscal Monitor following the finalization and publication of the government’s financial results for the preceding fiscal year, typically in the fall.

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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 2020