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Archived - Canada's Fiscal Situation and Outlook

• The budget will be balanced in 1997-98, a dramatic improvement on the $42 billion deficit recorded in 1993-94. This is the first balanced budget since 1969-70.
• For 1998-99 and 1999-2000, the government is committed to back-to-back balanced budgets. This will mark the first time in nearly 50 years that the federal government will have balanced its books for three consecutive years.
• In 1996-97, Canada's debt-to-GDP ratio recorded its first significant decline in 25 years by falling to 71.1 per cent from 71.9 per cent in 1995-96. This decline means that economic growth began to outpace the growth of the debt, thereby reducing the burden of debt on the economy. The debt-to-GDP ratio will decrease again in 1997-98, and will continue to do so in 1998-99 and 1999-2000 when it is projected to fall to about 63 per cent. The goal is to put the debt-to-GDP ratio on a permanent downward track.
• Financial requirements -- the amount of new money the government has to borrow -- have been eliminated after reaching a peak level of $34.5 billion in 1992-93. In fact, the government recorded a small financial surplus ($1.3 billion) in 1996-97. This means that, for the first time in 27 years, the government did not have to borrow new money on financial markets to pay for its programs or for interest on the debt. With this budget's commitment to balanced budgets, there will be ongoing financial surpluses through to 1999-2000.
• Financial requirements or financial surplus is the measure by which many other industrialized countries, including the United States, calculate their budgetary balance. Using this measure, Canada is the only Group of Seven (G-7) country to have already balanced its books.
• Financial surpluses also mean that the federal government can now start to pay down its market debt -- the total of past borrowing. In fact, from April to December 1997, the government repaid $12.9 billion in market debt.
• Even with the new spending initiatives proposed in this budget, federal program spending will continue to decline relative to the size of the economy. In 1993-1994, total program spending as a percentage of the economy (GDP) stood at 16.6 per cent. By 1999-2000, it will have declined to 11.5 per cent -- its lowest level in about 50 years.
• Most of the increase in budgetary revenues between 1993-94 and 1997-98 was due to a growing economy and more Canadians being employed. The general and targeted tax relief initiatives proposed in this budget will restrain the growth in budgetary revenues over the next two years.