- Fiscal Monitor 2001 -

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Highlights of financial results for January 2001

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Highlights

January 2001: budgetary deficit of $1.1 billion

There was a budgetary deficit of $1.149 billion in January 2001, compared to a surplus of $811 million in January 2000. Of this $2.0 billion year-over-year deterioration in the fiscal balance, $1.4 billion was attributable to the Relief for Heating Expenses.

April 2000 to January 2001: budgetary surplus of $16.4 billion

Over the first 10 months of fiscal year 2000-01, the budgetary surplus was estimated at $16.4 billion, up $4.6 billion from the surplus of $11.8 billion reported in the same period of 1999-2000.

These results continue to be in line with the average private sector forecast of the fiscal surplus for 2000-01, as set out in the October 18, 2000, Economic Statement and Budget Update. Over the balance of the fiscal year, the cumulative budgetary surplus is expected to continue to decline, as the full impact of various policy actions is realized. These include the reduction in personal income tax rates; the elimination of the 5-per-cent surtax; increases in the thresholds; the restoration of full indexation of the personal income tax system; and funding for health information and communications technology and the Canada Foundation for Innovation. The net impact of these initiatives is estimated to be at least $3 billion. In addition, corporate income tax revenues over the balance of the year are expected to be lower, reflecting timing considerations. In the Economic Statement and Budget Update, a surplus for the year as a whole of $11.9 billion was estimated, of which a minimum of $10 billion was committed to reducing debt.

January 2001: budgetary results

The year-over-year deterioration in the budgetary balance of $2.0 billion was largely attributable to higher program spending, up $2.4 billion. This increase was primarily due to the heating expense relief payment and timing factors reflecting Y2K-related contingency planning in December 1999, as noted in last month’s Fiscal Monitor.

On a year-over-year basis, budgetary revenues were up 2.6 per cent, or $0.4 billion. Among the major components:

Table 1
Summary statement of transactions


  January April to January
  2000 2001 1999-00 2000-01

  ($ millions)
Budgetary transactions        
Revenues 13,648 14,000 133,533 144,563
Program spending -9,288 -11,765 -87,365 -93,776
Operating surplus 4,360 2,235 46,168 50,787
Public debt charges -3,549 -3,384 -34,375 -34,408
Budgetary balance (deficit/surplus) 811 -1,149 11,793 16,379
Non-budgetary transactions 2,609 4,259 -2,753 -5,570
Financial requirements/source
(excluding foreign exchange transactions)
3,420 3,110 9,040 10,809
Foreign exchange transactions -6,099 -1,694 -6,407 -1,566
Net financial balance -2,679 1,416 2,633 9,243
Net change in borrowings -2,084 2,458 -2,688 -14,158
Net change in cash balances -4,763 3,874 -55 -4,915
Cash balance at end of period     9,170 8,039

Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.

Within program spending, on a year-over-year basis:

The decline in public debt charges, on a year-over-year basis, was attributable to timing adjustments.

April 2000 to January 2001: budgetary results

Over the first 10 months of fiscal year 2000-01, the budgetary surplus was estimated at $16.4 billion, up $4.6 billion from the surplus of $11.8 billion reported in the same period of 1999-2000.

Budgetary revenues were up $11.0 billion, or 8.3 per cent, on a year-over-year basis. Among the major revenue components:

Table 2
Budgetary revenues


  January   April to January  
  2000 2001 Change 1999-00 2000-01 Change

  ($ millions) (%) ($ millions) (%)
Income taxes            
Personal income tax 6,798 6,758 -0.6 66,663 70,897 6.4
Corporate income tax 1,608 1,642 2.1 15,748 19,153 21.6
Other income tax revenue 589 655 11.2 2,762 3,002 8.7
Total income tax 8,995 9,055 0.7 85,173 93,052 9.3
Employment insurance premium revenues 1,347 1,439 6.8 14,659 15,024 2.5
Excise taxes and duties            
Goods and services tax 2,088 2,340 12.1 19,742 21,455 8.7
Customs import duties 108 219 102.8 1,871 2,293 22.6
Sales and excise taxes 705 643 -8.8 6,888 6,954 1.0
Total excise taxes and duties 2,901 3,202 10.4 28,501 30,702 7.7
Total tax revenues 13,243 13,696 3.4 128,333 138,778 8.1
Non-tax revenues 405 304 -24.9 5,200 5,785 11.3
Total budgetary revenues 13,648 14,000 2.6 133,533 144,563 8.3

Program spending increased by $6.4 billion, or 7.3 per cent, in the April 2000 to January 2001 period, compared to the same period in 1999-2000. This increase was spread among all major components.

Table 3
Budgetary expenditures


  January   April to January  
  2000 2001 Change 1999-00 2000-01 Change

  ($ millions) (%) ($ millions) (%)
Transfer payments to            
Persons            
  Elderly benefits 1,909 2,054 7.6 19,451 20,133 3.5
  Employment
  insurance benefits
1,324 1,157 -12.6 9,204 8,775 -4.7
  Heating expense relief   1,434     1,434  
  Total 3,233 4,645 43.7 28,655 30,342 5.9
Other levels of government            
  Canada Health and
  Social Transfer
1,042 1,125 8.0 10,417 11,250 8.0
  Fiscal transfers 989 1,181 19.4 9,020 10,201 13.1
  Medical Equipment
  Fund
        1,000  
  Alternative Payments
  for Standing
  Programs
-188 -206 9.6 -1,876 -2,055 9.5
  Total 1,843 2,100 13.9 17,561 20,396 16.1
Direct program spending            
Subsidies and other transfers            
  Agriculture 690 57 -91.7 1,220 440 -63.9
  Foreign Affairs 160 149 -6.9 1,212 1,175 -3.1
  Health 43 105 144.2 861 925 7.4
  Human Resources
  Development
96 366 281.3 1,247 1,181 -5.3
  Indian and Northern
  Development
161 206 28.0 3,270 3,473 6.2
  Industry and Regional
  Development
77 87 13.0 1,136 1,100 -3.2
  Veterans Affairs 119 130 9.2 1,157 1,208 4.4
  Other 160 202 26.1 1,682 1,779 5.7
  Total 1,506 1,302 -13.6 11,785 11,281 -4.3
Payments to Crown
corporations
           
  Canadian Broadcasting
  Corporation
20 65 225.0 730 843 15.5
  Canada Mortgage and
   Housing Corporation
150 150 0.0 1,495 1,520 1.7
  Other 70 82 17.1 875 1,221 39.5
  Total 240 297 23.8 3,100 3,584 15.6
Operating and capital expenditures            
  Defence 740 1,004 35.7 8,643 8,652 0.1
  All other departmental
  expenditures
1,726 2,417 40.0 17,621 19,521 10.8
   Total 2,466 3,421 38.7 26,264 28,173 7.3
Total direct program spending 4,212 5,020 19.2 41,149 43,038 4.6
Total program expenditures 9,288 11,765 26.7 87,365 93,776 7.3
Public debt charges 3,549 3,384 -4.6 34,375 34,408 0.1
Total budgetary expenditures 12,837 15,149 18.0 121,740 128,184 5.3

Memorandum item: 
Total transfers
6,582 8,047 22.3 58,001 62,019 6.9

Public debt charges were up marginally, as an increase in the average effective interest rate on interest-bearing debt more than offset a decline in the stock of that debt.

Financial source of $10.8 billion (excluding foreign exchange transactions) for April 2000 to January 2001

The budgetary balance is presented on a modified accrual basis of accounting, recording government liabilities when they are incurred, regardless of when the cash payment is made. In addition, the budgetary balance includes only those activities over which the Government has legislative control.

In contrast, financial requirements/source measures the difference between cash coming in to the Government and cash going out. Financial requirements/source differs from the budgetary balance as the former includes transactions in loans, investments and advances, federal employees’ pension accounts, other specified purpose accounts, and changes in other financial assets and liabilities. These activities are included as part of non-budgetary transactions. The conversion from accrual to cash is also reflected in non-budgetary transactions.

Non-budgetary transactions resulted in a net requirement of $5.6 billion in first 10 months of 2000-01, compared to a requirement of $2.8 billion in the same period in 1999-2000. This was attributable, in part, to the payments related to the pay equity settlement, changes to the financing of the Canada Student Loans Program, and the investing of current contributions to the federal employees’ pension plans in the private market.

As a result, with a budgetary surplus of $16.4 billion and a net requirement of $5.6 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $10.8 billion in the April 2000 to January 2001 period, compared to a financial source of $9.0 billion in the same period in 1999-2000.

Net financial source of $9.2 billion for April 2000 to January 2001

Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account. The purpose of the Exchange Fund Account is to promote order and stability in the foreign exchange market. The buying of Canadian dollars represents a source of funds from exchange fund transactions, while the selling of Canadian dollars represents a requirement. Changes in foreign currency liabilities, which are undertaken to change the level of Canada’s foreign exchange reserves, also impact on foreign exchange transactions. Taking all of these factors into account, there was a net requirement of $1.6 billion in the first 10 months of 2000-01, compared to a net requirement of $6.4 billion in the same period in 1999-2000.

Table 4
The budgetary balance and financial requirements/source


  January April to January
  2000 2001 1999-00 2000-01

  ($ millions)
Budgetary balance (deficit/surplus) 811 -1,149 11,793 16,379
Loans, investments and advances        
Crown corporations 86 53 393 401
Other 41 -43 -63 -885
Total 127 10 330 -484
Specified purpose accounts        
Canada Pension Plan Account -482 -352 -471 -876
Superannuation accounts 504 17 4,206 1,571
Other -24 17 -130 -31
Total -2 -318 3,605 664
Other transactions 2,484 4,567 -6,688 -5,750
Total non-budgetary transactions 2,609 4,259 -2,753 -5,570
Financial requirements/source        
(excluding foreign exchange transactions) 3,420 3,110 9,040 10,809
Foreign exchange transactions -6,099 -1,694 -6,407 -1,566
Net financial balance -2,679 1,416 2,633 9,243

Table 5
Net financial balance and net borrowings


  January April to January
  2000 2001 1999-00 2000-01

  ($ millions)
Net financial balance -2,679 1,416 2,633 9,243
Net increase (+)/decrease (-) in borrowings        
Payable in Canadian dollars        
  Marketable bonds 8 1,500 6,957 9,819
  Canada Savings Bonds -4 136 -684 -1,067
  Treasury bills -1,950 900 -5,450 -20,250
  Other 50 34 -285 -62
  Total -1,896 2,570 538 -11,560
Payable in foreign currencies        
  Marketable bonds 0 0 2,527 -2,202
  Notes and loans   -580   -580
  Canada bills -180 468 -5,489 220
  Canada notes -8   -264 -36
  Total -188 -112 -3,226 -2,598
Net change in borrowings -2,084 2,458 -2,688 -14,158
Change in cash balance -4,763 3,874 -55 -4,915

Table 6
Condensed statement of assets and liabilities


  March 31, 2000 January 31, 2001 Change

  ($ millions)
Liabilities      
Accounts payable, accruals and allowances 40,748 31,250 -9,498
Interest-bearing debt      
  Pension and other
  accounts
     
    Public sector pensions 128,346 129,917 1,571
    Canada Pension Plan
    (net of securities)
6,217 5,341 -876
    Other pension and
    other accounts
6,963 6,932 -31
    Total pension and
    other accounts
141,526 142,190 664
  Unmatured debt      
    Payable in Canadian dollars      
      Marketable bonds 293,927 303,746 9,819
      Treasury bills 99,850 79,600 -20,250
      Canada Savings Bonds 26,489 25,422 -1,067
      Non-marketable bonds
      and bills
3,552 3,490 -62
      Subtotal 423,818 412,258 -11,560
      Payable in foreign currencies 32,588 29,992 -2,596
      Total unmatured debt 456,406 442,250 -14,156
    Total interest-bearing debt 597,932 584,440 -13,492
Total liabilities 638,680 615,690 -22,990
Assets      
Cash and accounts receivable 18,864 10,203 -8,661
Foreign exchange accounts 41,494 43,060 1,566
Loans, investments and advances (net of allowances) 13,796 14,280 484
Total assets 74,154 67,543 -6,611
Accumulated deficit (net public debt) 564,526 548,147 -16,379

With a budgetary surplus of $16.4 billion, a net requirement of $5.6 billion from non-budgetary transactions and a net requirement of $1.6 billion from foreign exchange transactions, there was a net financial source of $9.2 billion in the April 2000 to January 2001 period, compared to a net source of $2.6 billion in the same period in 1999-2000.

Net borrowings down $14.2 billion for April 2000 to January 2001

This financial source, coupled with a drawdown in cash balances of $4.9 billion, resulted in a decline of $14.2 billion in the Government’s holding of market debt to the end of January 2001. 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. At the end of January 2001 cash balances were $8.0 billion.