The Fiscal Monitor - October 2020

Highlights

October 2020

There was a budgetary deficit of $18.5 billion in October 2020, compared to a deficit of $3.3 billion in October 2019. The budgetary deficit before net actuarial losses was $17.2 billion, compared to a deficit of $2.4 billion in October 2019. The budgetary balance before net actuarial losses is a new measure 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.

Chart 1
Monthly Budgetary Balance and Budgetary Balance Excluding Net Actuarial Losses
Chart 1: Monthly Budgetary Balance and Budgetary Balance  Excluding Net Actuarial Losses

Compared to October 2019:

April to October 2020

For the April to October period of the 2020–21 fiscal year, the government posted a budgetary deficit of $216.6 billion, compared to a deficit of $9.1 billion reported for the same period of 2019–20. The budgetary deficit before net actuarial losses was $207.6 billion, compared to a deficit of $2.8 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:

Chart 2
Year-to-Date Budgetary Balance and Budgetary Balance Excluding Net Actuarial Losses
Chart 2: Year-to-Date Budgetary Balance and Budgetary Balance  Excluding Net Actuarial Losses

1Sources: Annual Financial Report of the Government of Canada 2019-2020; Fall Economic Statement 2020.

Table 1
Summary statement of transactions
$ millions
  October April to October
2019 2020 2019–20 2020–21
Budgetary transactions        
Revenues
25,465 24,067 189,532 152,915
Expenses
       
Program expenses, excluding net actuarial losses1
-26,040 -39,714 -177,552 -348,582
Public debt charges
-1,782 -1,576 -14,757 -11,966
Budgetary balance, excluding net actuarial losses1
-2,357 -17,223 -2,777 -207,633
Net actuarial losses1
-897 -1,283 -6,277 -8,983
Budgetary balance (deficit/surplus)
-3,254 -18,506 -9,054 -216,616
Non-budgetary transactions 2,003 13,351 -5,681 -41,062
Financial source/requirement -1,251 -5,155 -14,735 -257,678
Net change in financing activities 14,108 28,736 24,701 324,799
Net change in cash balances 12,857 23,581 9,966 67,121
Cash balance at end of period     49,969 111,801
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 October 2020 totalled $24.1 billion, down $1.4 billion, or 5.5 per cent, from October 2019.

For the April to October period of 2020–21, revenues were $152.9 billion, down $36.6 billion, or 19.3 per cent, from the same period the previous year.

Table 2
Revenues
  October  April to October 
2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Tax revenues            
Income taxes
           
Personal
12,601 12,313 -2.3 92,102 91,136 -1.0
Corporate
2,862 3,860 34.9 26,868 22,425 -16.5
Non-resident
1,170 674 -42.4 5,216 4,409 -15.5
Total income tax revenues
16,633 16,847 1.3 124,186 117,970 -5.0
Other taxes and duties
           
Goods and Services Tax
3,860 3,453 -10.5 24,628 15,188 -38.3
Energy taxes
506 465 -8.1 3,381 2,827 -16.4
Customs import duties
413 418 1.2 3,222 2,310 -28.3
Other excise taxes and duties
492 346 -29.7 3,938 3,328 -15.5
Total other taxes and duties
5,271 4,682 -11.2 35,169 23,653 -32.7
Total tax revenues
21,904 21,529 -1.7 159,355 141,623 -11.1
Fuel charge proceeds 159 221 39.0 731 2,162 195.8
Employment Insurance premiums 1,186 1,214 2.4 12,489 12,138 -2.8
Other revenues 2,216 1,103 -50.2 16,957 -3,008 -117.7
Total revenues 25,465 24,067 -5.5 189,532 152,915 -19.3
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), the Canada Emergency Commercial Rent Assistance (CECRA) program, and the Canada Recovery Benefits. Further information regarding these measures is provided below.

Program expenses excluding net actuarial losses in October 2020 were $39.7 billion, up $13.7 billion, or 52.5 per cent, from October 2019.   

Public debt charges decreased by $0.2 billion, or 11.6 per cent, reflecting lower interest on Government of Canada treasury bills, as well as lower interest on the government's pension and other employee future benefit obligations due to 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 $0.4 billion, or 43.0 per cent, in large part due to declines in year-end interest rates used in valuing these obligations, as well as increased costs associated with the utilization of disability and other future benefits provided to veterans.

For the April to October period of 2020–21, program expenses excluding net actuarial losses were $348.6 billion, up $171.0 billion, or 96.3 per cent, from the same period the previous year.

Public debt charges decreased by $2.8 billion, or 18.9 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 $2.7 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. The increase in net actuarial losses is due in large part 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
  October  April to October  
  2019 2020 Change 2019–20 2020–21 Change
  ($ millions) (%) ($ millions) (%)
Major transfers to persons            
Elderly benefits
4,759 4,912 3.2 32,340 34,115 5.5
Employment Insurance benefits1
1,146 4,069 255.1 10,189 39,453 287.2
Canada Emergency Response Benefit and Canada Recovery Benefits1
- 1,958 n/a - 41,818 n/a
Children's benefits
2,025 2,087 3.1 14,118 16,310 15.5
Total major transfers to persons
7,930 13,026 64.3 56,647 131,696 132.5
Major transfers to other levels of government            
Canada Health Transfer
3,364 3,489 3.7 23,551 24,424 3.7
Canada Social Transfer
1,215 1,252 3.0 8,508 8,764 3.0
Equalization
1,653 1,714 3.7 11,575 12,001 3.7
Territorial Formula Financing
268 284 6.0 2,606 2,759 5.9
Gas Tax Fund
324 - -100.0 1,408 2,170 54.1
Home care and mental health
- - n/a 550 625 13.6
Other fiscal arrangements2
-481 -452 6.0 -1,432 13,523 844.3
Total major transfers to other levels of government
6,343 6,287 -0.9 46,766 64,266 37.4
Direct program expenses3            
Fuel charge proceeds returned
10 54 440.0 1,267 2,717 114.4
Canada Emergency Wage Subsidy
- 5,886 n/a - 50,023 n/a
Other transfer payments
3,785 6,939 83.3 23,397 47,450 102.8
Operating expenses
7,972 7,522 -5.6 49,475 52,430 6.0
Total direct program expenses
11,767 20,401 73.4 74,139 152,620 105.9
Total program expenses, excluding net actuarial losses3 26,040 39,714 52.5 177,552 348,582 96.3
Public debt charges 1,782 1,576 -11.6 14,757 11,966 -18.9
Total expenses, excluding net actuarial losses3 27,822 41,290 48.4 192,309 360,548 87.5
Net actuarial losses3
897 1,283 43.0 6,277 8,983 43.1
Total expenses 28,719 42,573 48.2 198,586 369,531 86.1
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
  October  April to October  
  2019 2020 Change 2019–20 2020–21 Change
($ millions) (%) ($ millions) (%)
Transfer payments 18,068 32,192 78.2 128,077 296,152 131.2
Other expenses            
Personnel, excluding net actuarial losses1
4,506 4,534 0.6 28,876 31,205 8.1
Transportation and communications
268 172 -35.8 1,520 977 -35.7
Information
28 23 -17.9 165 189 14.5
Professional and special services
1,067 1,070 0.3 5,778 5,682 -1.7
Rentals
317 276 -12.9 1,850 1,931 4.4
Repair and maintenance
302 281 -7.0 1,661 1,455 -12.4
Utilities, materials and supplies
221 478 116.3 1,390 3,088 122.2
Other subsidies and expenses
813 203 -75.0 5,153 4,701 -8.8
Amortization of tangible capital assets
427 477 11.7 2,989 3,146 5.3
Net loss on disposal of assets
23 8 -65.2 93 56 -39.8
Total other expenses
7,972 7,522 -5.6 49,475 52,430 6.0
Total program expenses, excluding net actuarial losses1 26,040 39,714 52.5 177,552 348,582 96.3
Public debt charges 1,782 1,576 -11.6 14,757 11,966 -18.9
Total expenses, excluding net actuarial losses1 27,822 41,290 48.4 192,309 360,548 87.5
Net actuarial losses1
897 1,283 43.0 6,277 8,983 43.1
Total expenses 28,719 42,573 48.2 198,586 369,531 86.1
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.
Chart 3
Revenues and expenses (April to October 2020)
Chart 3: Revenues and expenses (April to October   2020)

Note: Totals may not add due to rounding.

Financial requirement of $257.7 billion for April to October 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 $216.6 billion and a requirement of $41.1 billion from non-budgetary transactions, there was a financial requirement of $257.7 billion for the April to October 2020 period, compared to a financial requirement of $14.7 billion for the same period of the previous year. 

The increased financial requirement for non-budgetary transactions for the April to October 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
  OctoberApril to October
  2019 2020 2019–20 2020–21
Budgetary balance (deficit/surplus) -3,254 -18,506 -9,054 -216,616
Non-budgetary transactions        
Accounts payable, accrued liabilities and accounts receivable
2,704 16,168 -3,017 -23,975
Pensions, other future benefits, and other liabilities
844 1,155 6,240 9,181
Foreign exchange accounts
119 -1,395 305 -1,070
Loans, investments and advances
-1,387 -2,235 -8,741 -23,267
Non-financial assets
-277 -342 -468 -1,931
Total non-budgetary transactions
2,003 13,351 -5,681 -41,062
Financial source/requirement -1,251 -5,155 -14,735 -257,678
Note: Totals may not add due to rounding.

Net financing activities up $324.8 billion

The government financed this financial requirement of $257.7 billion and increased cash balances by $67.1 billion by increasing unmatured debt by $324.8 billion. The increase in unmatured debt was achieved primarily through the issuance of treasury bills and marketable bonds. 

Cash balances at the end of October 2020 stood at $111.8 billion, up $67.1 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
  October April to October
  2019 2020 2019–20 2020–21
Financial source/requirement -1,251 -5,155 -14,735 -257,678
Net increase (+)/decrease (-) in financing activities        
Unmatured debt transactions
       
Canadian currency borrowings
       
Marketable bonds
11,150 54,906 25,214 192,159
Treasury bills
2,800 -26,800 2,700 125,433
Retail debt
-11 -4 -126 -29
Total Canadian currency borrowings
13,939 28,102 27,788 317,563
Foreign currency borrowings
-35 281 -782 4,571
Total market debt transactions
13,904 28,383 27,006 322,134
Cross-currency swap revaluation
290 -63 -1,627 -4,833
Unamortized discounts and premiums on market debt
-65 434 157 7,650
Obligations related to capital leases and other unmatured debt
-21 -18 -835 -152
Net change in financing activities 14,108 28,736 24,701 324,799
Change in cash balance 12,857 23,581 9,966 67,121
Cash balance at end of period     49,969 111,801
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 $221.0 billion over the April to October 2020 period, reflecting the $216.6-billion budgetary deficit and $4.4 billion in other comprehensive losses.

Table 7
Condensed statement of assets and liabilities
$ millions
  March 31,
2020
October 31,
2020
Change
Liabilities      
Accounts payable and accrued liabilities
163,833 192,312 28,479
Interest-bearing debt
Unmatured debt
Payable in Canadian currency
Marketable bonds
596,864 789,023 192,159
Treasury bills
151,867 277,300 125,433
Retail debt
497 468 -29
Subtotal
749,228 1,066,791 317,563
Payable in foreign currencies
15,941 20,512 4,571
Cross-currency swap revaluation
10,592 5,759 -4,833
Unamortized discounts and premiums on market debt
2,487 10,137 7,650
Obligations related to capital leases and other unmatured debt
5,503 5,351 -152
Total unmatured debt
783,751 1,108,550 324,799
Pension and other liabilities
Public sector pensions
168,596 168,050 -546
Other employee and veteran future benefits
126,378 136,179 9,801
Other liabilities
6,051 5,977 -74
Total pension and other liabilities
301,025 310,206 9,181
Total interest-bearing debt
1,084,776 1,418,756 333,980
Total liabilities
1,248,609 1,611,068 362,459
Financial assets
Cash and accounts receivable
173,715 293,290 119,575
Foreign exchange accounts
104,903 105,973 1,070
Loans, investments, and advances (net of allowances)1
152,502 171,392 18,890
Public sector pension assets
4,598 4,598 0
Total financial assets
435,718 575,253 139,535
Net debt 812,891 1,035,815 222,924
Non-financial assets 91,531 93,462 1,931
Federal debt (accumulated deficit) 721,360 942,353 220,993
Note: Totals may not add due to rounding.
1 October 31, 2020 amount includes $4.4 billion in other comprehensive losses from enterprise Crown corporations and other government business enterprises for the April to October 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 20192020
    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 20192020, 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.

December 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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