The Fiscal Monitor - September 2020

Highlights

September 2020

There was a budgetary deficit of $27.6 billion in September 2020, compared to a deficit of $0.6 billion in September 2019. The budgetary deficit before net actuarial losses was $24.4 billion, compared to a surplus of $0.3 billion in September 2019. The budgetary balance before net actuarial losses is a new measure that is being introduced to supplement the traditional budgetary balance and improve the transparency of the government's financial reporting by isolating the impact of the amortization of net actuarial losses arising from the revaluation of the government's pension and other employee future benefit plans.

The government's 2020–21 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 and Budgetary Balance Excluding Net Actuarial Losses

For details, refer to the preceding paragraph.

Compared to September 2019:

April to September 2020

For the April to September period of the 2020–21 fiscal year, the government posted a budgetary deficit of $198.1 billion, compared to a deficit of $5.8 billion reported for the same period of 2019–20. The budgetary deficit before net actuarial losses was $190.4 billion, compared to a deficit of $0.4 billion 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.

Compared to fiscal year 2019–20:

 

Year-to-Date Budgetary Balance and Budgetary Balance Excluding Net Actuarial Losses

For details, refer to the preceding paragraph.
1Sources: Annual Financial Report of the Government of Canada 2019-2020; Fall Economic Statement 2020.
Table 1
Summary statement of transactions
$ millions
September April to September
2019 2020 2019–20 2020–21
Budgetary transactions        
  Revenues 27,252 31,648 164,067 128,848
  Expenses        
    Program expenses, excluding net actuarial losses1 -24,807 -54,726 -151,512 -308,868
    Public debt charges -2,126 -1,300 -12,976 -10,390
  Budgetary balance, excluding net actuarial losses1 319 -24,378 -421 -190,410
    Net actuarial losses1 -897 -3,215 -5,380 -7,700
  Budgetary balance (deficit/surplus) -578 -27,593 -5,801 -198,110
Non-budgetary transactions 3,040 -1,792 -7,686 -54,413
Financial source/requirement 2,462 -29,385 -13,487 -252,523
Net change in financing activities -11,306 -11,587 10,594 296,063
Net change in cash balances -8,844 -40,972 -2,893 43,540
Cash balance at end of period     37,112 88,219
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.
1Comparative figures and figures for April to August 2020 have been reclassified to conform to the presentation used in the Annual Financial Report of the Government of Canada 2019–2020. Information regarding this reclassification can be found in Note 8 at the end of this document.

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 September 2020 totalled $31.6 billion, up $4.4 billion, or 16.1 per cent, from September 2019.

For the April to September period of 2020–21, revenues were $128.8 billion, down $35.2 billion, or 21.5 per cent, from the same period the previous year.

Table 2
Revenues
September  April to September 
2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal 14,369 14,282 -0.6 79,501 78,823 -0.9
    Corporate 3,479 10,396 198.8 24,006 18,565 -22.7
    Non-resident 504 459 -8.9 4,047 3,736 -7.7
    Total income tax revenues 18,352 25,137 37.0 107,554 101,124 -6.0
  Other taxes and duties            
    Goods and Services Tax 3,325 3,365 1.2 20,767 11,735 -43.5
    Energy taxes 533 468 -12.2 2,875 2,362 -17.8
    Customs import duties 442 411 -7.0 2,809 1,892 -32.6
    Other excise taxes and duties 623 502 -19.4 3,445 2,982 -13.4
    Total other taxes and duties 4,923 4,746 -3.6 29,896 18,971 -36.5
  Total tax revenues 23,275 29,883 28.4 137,450 120,095 -12.6
Fuel charge proceeds 136 249 83.1 572 1,941 239.3
Employment Insurance premiums 1,342 1,369 2.0 11,303 10,924 -3.4
Other revenues 2,499 147 -94.1 14,742 -4,112 -127.9
Total revenues 27,252 31,648 16.1 164,067 128,848 -21.5
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 Safe Restart Agreement, 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 excluding net actuarial losses in September 2020 were $54.7 billion, up $29.9 billion, or 120.6 per cent, from September 2019.

Public debt charges decreased by $0.8 billion, or 38.9 per cent, reflecting lower Consumer Price Index adjustments on Real Return Bonds, and lower interest on the government's pension and other employee future benefit obligations, reflecting decreases in the discount rates used to value these obligations.

Net actuarial losses, which represent the amortization of changes in the value of the government's obligations for pensions and other employee future benefits accrued in previous fiscal years, increased by $2.3 billion, or 258.4 per cent, due to a year-to-date adjustment made to reflect the government's actuarial valuations prepared for the Public Accounts of Canada 2020.

For the April to September period of 2020–21, program expenses excluding net actuarial losses were $308.9 billion, up $157.4 billion, or 103.9 per cent, from the same period the previous year.

Public debt charges decreased by $2.6 billion, or 19.9 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds, lower interest on pension and benefit obligations, and lower interest on Government of Canada treasury bills.

Net actuarial losses increased by $2.3 billion, or 43.1 per cent, reflecting increases in the measurement of the government's obligations for pensions and other employee future benefits accrued in previous fiscal years due to declines in year-end interest rates used in valuing these obligations and increased costs associated with the utilization of disability and other future benefits provided to veterans.

Table 3
Expenses
  September  April to September  
  2019 2020 Change 2019–20 2020–21 Change
  ($ millions) (%) ($ millions) (%)
Major transfers to persons            
  Elderly benefits 4,625 4,901 6.0 27,581 29,203 5.9
  Employment Insurance benefits1 1,477 3,558 140.9 9,043 35,384 291.3
  Canada Emergency Response1 - 4,807 n/a - 39,860 n/a
  Children's benefits 2,057 1,736 -15.6 12,094 14,223 17.6
  Total major transfers to persons 8,159 15,002 83.9 48,718 118,670 143.6
Major transfers to other levels of government            
  Canada Health Transfer 3,364 3,489 3.7 20,186 20,935 3.7
  Canada Social Transfer 1,215 1,252 3.0 7,293 7,512 3.0
  Equalization 1,653 1,714 3.7 9,922 10,286 3.7
  Territorial Formula Financing 268 284 6.0 2,337 2,475 5.9
  Gas Tax Fund - - n/a 1,084 2,170 100.2
  Home care and mental health - - n/a 550 625 13.6
  Other fiscal arrangements2 -474 13,259 2,697.3 -951 13,976 1,369.6
  Total major transfers to other levels of government 6,026 19,998 231.9 40,421 57,979 43.4
Direct program expenses3            
  Fuel charge proceeds returned 14 62 342.9 1,257 2,663 111.9
  Canada Emergency Wage Subsidy - 6,705 n/a - 44,138 n/a
  Other transfer payments 3,614 5,348 48.0 19,612 40,510 106.6
  Operating expenses 6,994 7,611 8.8 41,504 44,908 8.2
  Total direct program expenses 10,622 19,726 85.7 62,373 132,219 112.0
Total program expenses, excluding net actuarial losses3 24,807 54,726 120.6 151,512 308,868 103.9
Public debt charges 2,126 1,300 -38.9 12,976 10,390 -19.9
Total expenses, excluding net actuarial losses3 26,933 56,026 108.0 164,488 319,258 94.1
  Net actuarial losses3 897 3,215 258.4 5,380 7,700 43.1
Total expenses 27,830 59,241 112.9 169,868 326,958 92.5

Notes: Totals may not add due to rounding.
1 Figures for April to August 2020 have been reclassified to conform to the presentation used in the Annual Financial Report of the Government of Canada 2019–2020. Information regarding this reclassification can be found in Note 8 at the end of this document.
2 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; transfers under the safe restart framework; and, other items.
3 Comparative figures and figures for April to August 2020 have been reclassified to conform to the presentation used in the Annual Financial Report of the Government of Canada 2019–2020. Information regarding this reclassification can be found in Note 8 at the end of this document.

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

Table 4
Total expenses by object of expense
  September  April to September  
  2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Transfer payments 17,813 47,115 164.5 110,008 263,960 139.9
Other expenses            
  Personnel, excluding net actuarial losses1 3,990 5,463 36.9 24,372 26,670 9.4
  Transportation and communications 220 93 -57.7 1,252 805 -35.7
  Information 26 25 -3.8 137 166 21.2
  Professional and special services 955 1,108 16.0 4,711 4,611 -2.1
  Rentals 228 262 14.9 1,533 1,655 8.0
  Repair and maintenance 317 274 -13.6 1,358 1,174 -13.5
  Utilities, materials and supplies 212 -541 -355.2 1,169 2,611 123.4
  Other subsidies and expenses 611 484 -20.8 4,340 4,498 3.6
  Amortization of tangible capital assets 427 436 2.1 2,562 2,669 4.2
  Net loss on disposal of assets 8 7 -12.5 70 49 -30.0
  Total other expenses 6,994 7,611 8.8 41,504 44,908 8.2
Total program expenses 24,807 54,726 120.6 151,512 308,868 103.9
Public debt charges 2,126 1,300 -38.9 12,976 10,390 -19.9
Total expenses, excluding net actuarial losses1 26,933 56,026 108.0 164,488 319,258 94.1
  Net actuarial losses1 897 3,215 258.4 5,380 7,700 43.1
Total expenses 27,830 59,241 112.9 169,868 326,958 92.5
Note: Totals may not add due to rounding.
1 Comparative figures and figures for April to August 2020 have been reclassified to conform to the presentation used in the Annual Financial Report of the Government of Canada 2019–2020. Information regarding this reclassification can be found in Note 8 at the end of this document.

Revenues and expenses (April to September 2020)

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

Financial requirement of $252.5 billion for April to September 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 $198.1 billion and a requirement of $54.4 billion from non-budgetary transactions, there was a financial requirement of $252.5 billion for the April to September 2020 period, compared to a financial requirement of $13.5 billion for the same period of the previous year.

The increased financial requirement for non-budgetary transactions for the April to September 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 year-over-year changes in the balances of taxes receivable and amounts payable related to tax, 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
  SeptemberApril to September
  2019 2020 2019–20 2020–21
Budgetary balance (deficit/surplus) -578 -27,593 -5,801 -198,110
Non-budgetary transactions        
  Accounts payable, accrued liabilities and accounts receivable 3,353 1,634 -5,721 -40,144
  Pensions, other future benefits, and other liabilities 901 3,657 5,396 8,027
  Foreign exchange accounts 1,112 -2,573 185 325
  Loans, investments and advances -2,277 -2,987 -7,355 -21,032
  Non-financial assets -49 -1,523 -191 -1,589
  Total non-budgetary transactions 3,040 -1,792 -7,686 -54,413
Financial source/requirement 2,462 -29,385 -13,487 -252,523
Note: Totals may not add due to rounding.

Net financing activities up $296.1 billion

The government financed this financial requirement of $252.5 billion and increased cash balances by $43.5 billion by increasing unmatured debt by $296.1 billion. The increase in unmatured debt was achieved primarily through the issuance of treasury bills and marketable bonds.

Cash balances at the end of September 2020 stood at $88.2 billion, up $43.5 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
  September April to September
  2019 2020 2019–20 2020–21
Financial source/requirement 2,462 -29,385 -13,487 -252,523
Net increase (+)/decrease (-) in financing activities        
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds -7,204 4,310 14,065 137,253
      Treasury bills -2,600 -19,000 -100 152,233
      Retail debt -14 -8 -115 -25
      Total Canadian currency borrowings -9,818 -14,698 13,850 289,461
    Foreign currency borrowings -792 627 -747 4,290
    Total market debt transactions -10,610 -14,071 13,103 293,751
    Cross-currency swap revaluation -518 1,092 -1,917 -4,770
    Unamortized discounts and premiums on market debt -163 1,409 222 7,216
    Obligations related to capital leases and other unmatured debt -15 -17 -814 -134
Net change in financing activities -11,306 -11,587 10,594 296,063
Change in cash balance -8,844 -40,972 -2,893 43,540
Cash balance at end of period     37,112 88,219
Note: Totals may not add due to rounding.

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 $202.5 billion over the April to September 2020 period, reflecting the $198.1-billion budgetary deficit and $4.4 billion in other comprehensive losses.

Table 7
Condensed statement of assets and liabilities
$ millions
  March 31,
2020
September 30,
2020
Change
Liabilities      
  Accounts payable and accrued liabilities 163,833 178,758 14,925
  Interest-bearing debt    
    Unmatured debt    
      Payable in Canadian currency    
        Marketable bonds 596,864 734,117 137,253
        Treasury bills 151,867 304,100 152,233
        Retail debt 497 472 -25
        Subtotal 749,228 1,038,689 289,461
      Payable in foreign currencies 15,941 20,231 4,290
      Cross-currency swap revaluation 10,592 5,822 -4,770
      Unamortized discounts and premiums on market debt 2,487 9,703 7,216
      Obligations related to capital leases and other unmatured debt 5,503 5,369 -134
      Total unmatured debt 783,751 1,079,814 296,063
    Pension and other liabilities
        Public sector pensions 168,596 168,229 -367
        Other employee and veteran future benefits 126,378 134,780 8,402
        Other liabilities 6,051 6,043 -8
        Total pension and other liabilities 301,025 309,052 8,027
      Total interest-bearing debt 1,084,776 1,388,866 304,090
    Total liabilities 1,248,609 1,567,624 319,015
Financial assets
    Cash and accounts receivable 173,715 272,324 98,609
    Foreign exchange accounts 104,903 104,578 -325
    Loans, investments, and advances
     (net of allowances)1
152,502 169,159 16,657
    Public sector pension assets 4,598 4,598 -
    Total financial assets 435,718 550,659 114,941
Net debt 812,891 1,016,965 204,074
Non-financial assets 91,531 93,120 1,589
Federal debt (accumulated deficit) 721,360 923,845 202,485
Note: Totals may not add due to rounding.
1 September 30, 2020 amount includes $4.4 billion in other comprehensive losses from enterprise Crown corporations and other government business enterprises for the April to September 2020 period.

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.
  8. The Department of Finance Canada has changed the presentation of the financial results in The Fiscal Monitor to: (a) separately present the recognition of actuarial gains and losses related to public sector pensions and other employee and veteran future benefits; and, (b) reflect CERB benefits paid to individuals eligible for EI within EI benefits. This new format is aligned with the presentation adopted in the Condensed Consolidated Statement of Operations and Accumulated Deficit in the Annual Financial Report of the Government of Canada 2019–2020.
    1. Actuarial gains and losses were previously reported as part of direct program expenses, but are now presented in a new line item titled "Net actuarial losses". A new subtotal line titled "Budgetary balance, excluding net actuarial losses" has also been added. The purpose of this revised presentation is to enhance financial reporting and decision making for users by isolating the impacts of re-measurements of public sector pension and other employee and veteran future benefit obligations, which are often significant and can potentially mask underlying events and trends in current government spending. Results for April to August 2020 and comparative figures for the prior year have been reclassified to conform to this new presentation. Further details regarding this change in presentation can be found in the Annual Financial Report of the Government of Canada 2019–2020, available on the Department of Finance Canada website.
    2. CERB payments to individuals eligible for EI were previously reported in The Fiscal Monitor within the line item titled "Canada Emergency Response Benefit", but have been reclassified to the line item "Employment Insurance benefits". CERB payments to individuals eligible for EI are charged to the EI Operating Account.

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 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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