The Fiscal Monitor - July 2020

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Highlights

July 2020

There was a budgetary deficit of $28.2 billion in July 2020, compared to a deficit of $1.5 billion in July 2019. The government’s financial results reflect the economic downturn and temporary measures implemented through the government’s Economic Response Plan to support Canadians and businesses facing hardship as a result of the COVID-19 outbreak.

Monthly budgetary balance

For details, refer to the preceding paragraph.

Revenues decreased by $6.3 billion, or 22.5 per cent, reflecting decreases in tax revenues and other revenues. Program expenses were up $20.8 billion, or 76.9 per cent, driven by increased transfers to individuals, businesses, and other levels of government as part of COVID-19 response measures. Public debt charges were down $0.3 billion, or 13.1 per cent, reflecting in part lower Consumer Price Index adjustments on Real Return Bonds.

April to July 2020

For the April to July period of the 2020–21 fiscal year, the government posted a budgetary deficit of $148.6 billion, compared to a deficit of $1.6 billion reported for the same period of 2019–20. The unprecedented shift in the government’s financial results reflects the severe deterioration in the economic situation and temporary measures implemented through the government’s Economic Response Plan to support Canadians and businesses facing hardship as a result of the COVID-19 outbreak during this period, and remains consistent with the budgetary balance presented in the Economic and Fiscal Snapshot in July.

Revenues were down $38.3 billion, or 34.1 per cent, primarily reflecting lower tax revenues and other revenues. Program expenses were up $111.1 billion, or 106.2 per cent, largely reflecting transfers to individuals and businesses under the Economic Response Plan, including the Canada Emergency Response Benefit (CERB), the Canada Emergency Wage Subsidy (CEWS), and the 25 per cent incentive for the Canada Emergency Business Account (CEBA). Public debt charges decreased by $2.4 billion, or 25.7 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

Year-to-date budgetary balance

For details, refer to the preceding paragraph.
1 Source: Economic and Fiscal Snapshot 2020.
Table 1
Summary statement of transactions
$ millions
July April to July
2019 2020 2019–20 2020–21
Budgetary transactions        
  Revenues 27,845 21,585 112,219 73,945
  Expenses        
    Program expenses -27,055 -47,848 -104,604 -215,708
    Public debt charges -2,260 -1,965 -9,172 -6,816
  Budgetary balance (deficit/surplus) -1,470 -28,228 -1,557 -148,579
Non-budgetary transactions -3,072 3,889 -12,811 -63,365
Financial source/requirement -4,542 -24,339 -14,368 -211,944
Net change in financing activities 11,502 25,449 17,888 323,098
Net change in cash balances 6,960 1,110 3,520 111,154
Cash balance at end of period     43,524 155,834
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Revenues

Revenues in 2020–21 have been affected by the economic impacts of the COVID-19 crisis and by measures introduced under the government’s Economic Response Plan, such as tax deferrals and the one-time Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit payment. However, due to challenges in isolating these impacts from underlying economic activity, it is not possible to provide an accurate measure of the impact of COVID-19 on federal revenues.

Revenues in July 2020 totalled $21.6 billion, down $6.3 billion, or 22.5 per cent, from July 2019.

For the April to July period of 2020–21, revenues were $73.9 billion, down $38.3 billion, or 34.1 per cent, from the same period the previous year.

Table 2
Revenues
July  April to July 
2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal 11,987 12,836 7.1 52,626 50,481 -4.1
    Corporate 4,623 1,519 -67.1 17,700 5,661 -68.0
    Non-resident 797 621 -22.1 2,925 2,670 -8.7
    Total income tax revenues 17,407 14,976 -14.0 73,251 58,812 -19.7
  Other taxes and duties            
    Goods and Services Tax 4,146 3,861 -6.9 14,326 5,311 -62.9
    Energy taxes 493 363 -26.4 1,864 1,481 -20.5
    Customs import duties 467 331 -29.1 1,925 1,107 -42.5
    Other excise taxes and duties 673 497 -26.2 2,248 1,942 -13.6
    Total other taxes and duties 5,779 5,052 -12.6 20,363 9,841 -51.7
  Total tax revenues 23,186 20,028 -13.6 93,614 68,653 -26.7
Fuel charge proceeds 165 345 109.1 302 1,274 321.9
Employment Insurance premiums 1,753 1,770 1.0 8,433 8,005 -5.1
Other revenues 2,741 -558 -120.4 9,870 -3,987 -140.4
Total revenues 27,845 21,585 -22.5 112,219 73,945 -34.1
Note: Totals may not add due to rounding.

Expenses

Program expenses in 2020–21 have been significantly impacted by spending measures under the Economic Response Plan, including the CERB, the CEWS, the 25 per cent incentive under the CEBA, the Canada Emergency Student Benefit (CESB), and the Canada Emergency Commercial Rent Assistance (CECRA) program. Further information regarding these measures is provided below.

Program expenses in July 2020 were $47.8 billion, up $20.8 billion, or 76.9 per cent, from July 2019.

Public debt charges decreased by $0.3 billion, or 13.1 per cent, reflecting in part lower Consumer Price Index adjustments on Real Return Bonds.

For the April to July period of 2020–21, program expenses were $215.7 billion, up $111.1 billion, or 106.2 per cent, from the same period the previous year.

Public debt charges decreased by $2.4 billion, or 25.7 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

Table 3
Expenses
  July   April to July  
  2019 2020 Change 2019–20 2020–21 Change
  ($ millions) (%) ($ millions) (%)
Major transfers to persons            
  Elderly benefits 4,642 4,906 5.7 18,309 19,411 6.0
  Employment Insurance benefits 1,614 951 -41.1 5,896 7,094 20.3
  Canada Emergency Response Benefit 0 8,776 n/a 0 50,404 n/a
  Children's benefits 1,935 2,092 8.1 8,030 10,377 29.2
  Total major transfers to persons 8,191 16,725 104.2 32,235 87,286 170.8
Major transfers to other levels of government            
  Canada Health Transfer 3,364 3,489 3.7 13,458 13,957 3.7
  Canada Social Transfer 1,215 1,252 3.0 4,862 5,008 3.0
  Equalization 1,656 1,714 3.5 6,615 6,858 3.7
  Territorial Formula Financing 268 284 6.0 1,800 1,906 5.9
  Gas Tax Fund 1,084 0 -100.0 1,084 2,170 100.2
  Home care and mental health 0 0 n/a 550 625 13.6
  Other fiscal arrangements1 -408 -96 -76.5 221 881 298.6
  Total major transfers to other levels of government 7,179 6,643 -7.5 28,590 31,405 9.8
Direct program expenses            
  Fuel charge proceeds returned 36 144 300.0 1,222 2,534 107.4
  Canada Emergency Wage Subsidy 0 7,841 n/a 0 30,593 n/a
  Other transfer payments 3,409 7,665 124.8 12,642 29,957 137.0
  Operating expenses 7,524 7,933 5.4 27,051 30,345 12.2
  Losses from employee future benefit plans 716 897 25.3 2,864 3,588 25.3
  Total direct program expenses 11,685 24,480 109.5 43,779 97,017 121.6
Total program expenses 27,055 47,848 76.9 104,604 215,708 106.2
Public debt charges 2,260 1,965 -13.1 9,172 6,816 -25.7
Total expenses 29,315 49,813 69.9 113,776 222,524 95.6
Notes: Totals may not add due to rounding. Certain comparative figures have been reclassified to conform to the current year's presentation.
1 Other fiscal arrangements include the Youth Allowances Recovery and Alternative Payments for Standing Programs, which represent a recovery from Quebec of a tax point transfer; statutory subsidies; payments under the 2005 Offshore Accords; payments to provinces in respect of common securities regulation; transfers under the new Hibernia Dividend Backed Annuity Agreement with Newfoundland and Labrador; the Essential Workers Wage Top-Up; and, other items.

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

Table 4
Total expenses by object of expense
  July   April to July  
  2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Transfer payments 18,815 39,018 107.4 74,689 181,775 143.4
Other expenses            
  Personnel 4,876 5,575 14.3 18,677 20,692 10.8
  Transportation and communications 278 186 -33.1 806 556 -31.0
  Information 36 28 -22.2 90 114 26.7
  Professional and special services 991 918 -7.4 2,877 2,569 -10.7
  Rentals 288 290 0.7 1,094 1,135 3.7
  Repair and maintenance 284 235 -17.3 780 687 -11.9
  Utilities, materials and supplies 218 656 200.9 746 2,902 289.0
  Other subsidies and expenses 811 497 -38.7 3,085 3,468 12.4
  Amortization of tangible capital assets 427 435 1.9 1,708 1,778 4.1
  Net loss on disposal of assets 31 10 -67.7 52 32 -38.5
  Total other expenses 8,240 8,830 7.2 29,915 33,933 13.4
Total program expenses 27,055 47,848 76.9 104,604 215,708 106.2
Public debt charges 2,260 1,965 -13.1 9,172 6,816 -25.7
Total expenses 29,315 49,813 69.9 113,776 222,524 95.6
Note: Totals may not add due to rounding.

Revenues and expenses (April to July 2020)

Year-to-date budgetary balance
Note: Totals may not add due to rounding.

Financial requirement of $211.9 billion for April to July 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 $148.6 billion and a requirement of $63.4 billion from non-budgetary transactions, there was a financial requirement of $211.9 billion for the April to July 2020 period, compared to a financial requirement of $14.4 billion for the same period the previous year. 

The increased financial requirement for non-budgetary transactions for the April to July 2020 period was mainly driven by changes in accounts payable, accrued liabilities and accounts receivable; and loans, investments and advances. Changes to accounts payable, accrued liabilities and accounts receivable reflect a number of factors, including the uptake of deferrals of personal and corporate income tax payments offered under the government’s Economic Response Plan, while changes to loans, investments and advances largely reflect loans advanced under the CEBA program during this period. 

Table 5
The budgetary balance and financial source/requirement
$ millions
  July April to July
  2019 2020 2019–20 2020–21
Budgetary balance (deficit/surplus) -1,470 -28,228 -1,557 -148,579
Non-budgetary transactions        
  Accounts payable, accrued liabilities and accounts receivable -3,108 3,048 -11,823 -48,015
  Pensions, other future benefits, and other liabilities 619 -564 2,534 3,306
  Foreign exchange accounts 377 -2,319 -122 -171
  Loans, investments and advances -758 3,907 -3,443 -18,819
  Non-financial assets -202 -183 43 334
  Total non-budgetary transactions -3,072 3,889 -12,811 -63,365
Financial source/requirement -4,542 -24,339 -14,368 -211,944
Note: Totals may not add due to rounding.

Net financing activities up $323.1 billion

The government financed this financial requirement of $211.9 billion and increased cash balances by $111.2 billion by increasing unmatured debt by $323.1 billion. The increase in unmatured debt was achieved primarily through the issuance of treasury bills and marketable bonds. 

Cash balances at the end of July 2020 stood at $155.8 billion, up $111.2 billion from their level at the end of March 2020. The significant increase in the cash balance largely reflects borrowings undertaken to meet the government’s projected financial requirements under the COVID-19 Economic Response Plan.

Table 6
Financial source/requirement and net financing activities
$ millions
  July April to July
  2019 2020 2019–20 2020–21
Financial source/requirement -4,542 -24,339 -14,368 -211,944
Net increase (+)/decrease (-) in financing activities        
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds 7,977 30,172 16,235 95,633
      Treasury bills 4,000 -7,100 4,600 222,533
      Retail debt -13 -4 -80 -14
      Total Canadian currency borrowings 11,964 23,068 20,755 318,152
    Foreign currency borrowings 361 709 -276 4,652
    Total market debt transactions 12,325 23,777 20,479 322,804
    Cross-currency swap revaluation -203 181 -1,915 -3,693
    Unamortized discounts and premiums on market debt 51 1,507 106 4,086
    Obligations related to capital leases and other unmatured debt -671 -16 -782 -99
Net change in financing activities 11,502 25,449 17,888 323,098
Change in cash balance 6,960 1,110 3,520 111,154
Cash balance at end of period     43,524 155,834
Note: Totals may not add due to rounding.

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 Standards Plus, which are 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. Table 7, 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.

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.

September 2020

© Her Majesty the Queen in Right of Canada (2020)

All rights reserved

All requests for permission to reproduce this document or any part thereof shall be addressed to the Department of Finance Canada.

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Cat. No.: F12-4E-PDF
ISSN: 1487-0134

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