- Fiscal Monitor 2001 -

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Highlights of financial results for July 2001

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Highlights

July 2001: budgetary surplus of $0.8 billion

There was a budgetary surplus of $0.8 billion in July 2001, down $1.0 billion from the revised surplus of $1.8 billion in July 2000.[1] This year-over-year decline was attributable to lower budgetary revenues (down $0.5 billion) and higher program spending (up $0.7 billion), dampened slightly by lower public debt charges (down $0.2 billion).

April 2001 to July 2001: budgetary surplus of $10.7 billion

The budgetary surplus was estimated at $10.7 billion for the April 2001 to July 2001 period, compared to the surplus of $10.5 billion reported in the same period of 2000-01. The increase in the year-over-year surplus was attributable to higher personal income tax settlement payments with respect to the 2000 taxation year. These payments related to extraordinary developments, primarily the strong increase in capital gains for the 2000 taxation year. This impact has been largely offset by lower personal income tax revenues from employment income (primarily due to the impact of tax reduction measures) and higher program spending (particularly higher transfers to other levels of government).

July 2001: budgetary results

Budgetary revenues decreased $0.5 billion, or 3.3 per cent, in July 2001 on a year-over-year basis, primarily attributable to lower personal income tax revenues.

Table 1
Summary statement of transactions


July

April to July

2000

2001

2000-01

2001-02


($ millions)

Budgetary transactions

Revenues

14,334

13,868

59,565

61,498

Program spending

-9,066

-9,741

-35,343

-37,557

Operating surplus

5,268

4,127

24,222

23,941

Public debt charges

-3,499

-3,345

-13,703

-13,250

Budgetary balance (deficit/surplus)

1,769

782

10,519

10,691

Non-budgetary transactions

2,421

1,041

-7,377

-9,666

Financial requirements/source

(excluding foreign exchange transactions)

4,190

1,823

3,142

1,025

Foreign exchange transactions

-899

-443

1,268

-131

Net financial balance

3,291

1,380

4,410

894

Net change in borrowings

-7,636

-1,589

-12,921

-10,573

Net change in cash balances

-4,345

-209

-8,511

-9,679

Cash balance at end of period

4,440

3,499


Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
Numbers for July 2000 have been revised (see footnote in box on first page).

On a year-over-year basis, program spending increased by $0.7 billion, or 7.4 per cent, reflecting strong increases in transfers to persons and other levels of government. Among the major components:

Table 2
Budgetary revenues


July

April to July

2000

2001

Change

2000-01

2001-02

Change


($ millions)

(%)

($ millions)

(%)

Income taxes

Personal income tax

7,476

6,358

-15.0

29,319

29,217

-0.3

Corporate income tax

1,695

2,028

19.6

7,875

8,859

12.5

Other income tax revenue

298

291

-2.3

1,109

1,203

8.5

Total income tax

9,469

8,677

-8.4

38,303

39,279

2.5

Employment insurance

 premium revenues

1,667

1,654

-0.8

6,976

6,981

0.1

Excise taxes and duties

Goods and services tax

1,739

1,664

-4.3

8,233

8,468

2.9

Customs import duties

201

250

24.4

656

923

40.7

Sales and excise taxes

658

784

19.1

2,738

2,959

8.1

Total excise taxes and duties

2,598

2,698

3.8

11,627

12,350

6.2

Total tax revenues

13,734

13,029

-5.1

56,906

58,610

3.0

Non-tax revenues

600

839

39.8

2,659

2,888

8.6

Total budgetary revenues

14,334

13,868

-3.3

59,565

61,498

3.2


Public debt charges, on a year-over year basis, were down $0.2 billion, or 4.4 per cent, reflecting both a lower stock of interest-bearing debt and a decline in the average effective interest rate on that debt.

April 2001 to July 2001: budgetary results

Over the first four months of fiscal year 2001-02, the budgetary surplus was estimated at $10.7 billion, up $0.2 billion from the surplus reported in the same period of 2000-01. This increase in the surplus primarily reflects higher personal income tax settlement payments with respect to the 2000 taxation year.

Budgetary revenues were up $1.9 billion, or 3.2 per cent, on a year-over-year basis. Among the major components:

Table 3
Budgetary expenditures


 

July

 

April to July  
 

2000

2001

Change

2000-01

2001-02

Change


 

($ millions)

(%)

($ millions)

(%)
             

Transfer payments to:

           

Persons

           

  Elderly benefits

2,012

2,103

4.5

7,948

8,306

4.5

  Employment insurance benefits

809

1,035

27.9

3,511

3,926

11.8

  Total

2,821

3,138

11.2

11,459

12,232

6.7

Other levels of government

           

  Canada Health and Social Transfer

1,125

1,442

28.2

4,500

5,767

28.2

  Fiscal transfers

978

1,045

6.9

3,862

4,143

7.3

Alternative Payments for

           

 Standing Programs

-206

-200

-2.9

-822

-800

-2.7

  Total

1,897

2,287

20.6

7,540

9,110

20.8

Direct program spending

           

Subsidies and other transfers

           

  Agriculture

27

41

51.9

54

422

681.5

  Foreign Affairs

102

177

73.5

346

503

45.4

  Health

99

121

22.2

353

394

11.6

  Human Resources Development

115

123

7.0

411

362

-11.9

  Indian and Northern Development

262

326

24.4

1,743

1,496

-14.2

  Industry and Regional Development

82

104

26.8

365

430

17.8

  Veterans Affairs

123

127

3.3

478

493

3.1

  Other

73

25

-65.8

883

568

-35.7

  Total

883

1,044

18.2

4,633

4,668

0.8

Payments to Crown corporations

           

  Canadian Broadcasting Corporation

86

80

-7.0

371

400

7.8

Canada Mortgage and

           

 Housing Corporation

150

158

5.3

620

632

1.9

  Other

128

122

-4.7

475

510

7.4

  Total

364

360

-1.1

1,466

1,542

5.2

Operating and capital expenditures

           

  Defence

948

908

-4.2

2,979

3,227

8.3

  All other departmental expenditures

2,153

2,004

-6.9

7,266

6,778

-6.7

  Total

3,101

2,912

-6.1

10,245

10,005

-2.3

Total direct program spending

4,348

4,316

-0.7

16,344

16,215

-0.8

Total program expenditures

9,066

9,741

7.4

35,343

37,557

6.3

Public debt charges

3,499

3,345

-4.4

13,703

13,250

-3.3

Total budgetary expenditures

12,565

13,086

4.1

49,046

50,807

3.6


Memorandum item:

           

Total transfers

5,601

6,469

15.5

23,632

26,010

10.1


Program spending increased by $2.2 billion, or 6.3 per cent, in the April 2001 to July 2001 period, compared to the same period last year.

Public debt charges were down 3.3 per cent, reflecting the impact of declines in both the stock of interest-bearing debt and the average effective interest rate on that debt.

Financial source of $1.0 billion (excluding foreign exchange transactions) for April 2001 to July 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 $9.7 billion in the first four months of 2001-02, compared to a net requirement of $7.4 billion in the same period in 2000-01. Traditionally, there are large requirements in the first half of any fiscal year, reflecting the payment of personal income tax refunds and certain liabilities, which were recognized in previous years’ budgetary results.

As a result, with a budgetary surplus of $10.7 billion and a net requirement of $9.7 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $1.0 billion in the April 2001 to July 2001 period, compared to a source of $3.1 billion in the same period last year.

Table 4
The budgetary balance and financial requirements/source


 

July

April to July
 

2000

2001

2000-01

2001-02


 

($ millions)

Budgetary balance (deficit/surplus)

1,769

782

10,519

10,691

Loans, investments and advances

       

Crown corporations

-112

-16

83

217

Other

49

-26

162

7

Total

-63

-42

245

224

Specified purpose accounts

       

Canada Pension Plan Account

-865

-418

-890

-861

Superannuation accounts

375

50

1,017

-446

Other

11

77

-216

53

Total

-479

-291

-89

-1,254

Other transactions

2,963

1,374

-7,533

-8,636

Total non-budgetary transactions

2,421

1,041

-7,377

-9,666

Financial requirements/source
 (excluding foreign exchange transactions)

4,190

1,823

3,142

1,025

Foreign exchange transactions

-899

-443

1,268

-131

Net financial balance

3,291

1,380

4,410

894


Table 5
Net financial balance and net borrowings


 

July

April to July

 

2000

2001

2000-01

2001-02


 

($ millions)

Net financial balance

3,291

1,380

4,410

894

Net increase (+)/decrease (-) in borrowings

       

Payable in Canadian dollars

       

  Marketable bonds

-3,075

400

6,151

-1,641

  Canada Savings Bonds

-151

-70

-553

-236

  Treasury bills

-4,200

-1,500

-16,750

-6,100

  Other

250

 

925

-4

  Total

-7,176

-1,170

-10,227

-7,981

Payable in foreign currencies

       

  Marketable bonds

   

-2,174

-1,576

  Notes and loans

 

 

 

-41

  Canada bills

-435

-419

-520

-802

  Canada notes

 

 

 

-173

  Total

-435

-419

-2,694

-2,592

Net change in borrowings

-7,611

-1,589

-12,921

-10,573

Change in cash balance

-4,320

-209

-8,511

-9,679


Table 6
Condensed statement of assets and liabilities


 

March 31,
2001

July 31,
2001

Change


 

($ millions)

Liabilities

     

Accounts payable, accruals and allowances

43,511

34,875

-8,636

Interest-bearing debt

     

  Pension and other accounts

     

    Public sector pensions

129,692

129,246

-446

    Canada Pension Plan (net of securities)

6,409

5,548

-861

    Other pension and other accounts

7,080

7,133

53

 

    Total pension and other accounts

143,181

141,927

-1,254

  Unmatured debt

     

    Payable in Canadian dollars

     

      Marketable bonds

294,627

292,986

-1,641

      Treasury bills

88,700

82,600

-6,100

      Canada Savings Bonds

25,753

25,517

-236

      Other

3,473

3,469

-4

 

      Subtotal

412,553

404,572

-7,981

    Payable in foreign currencies

33,171

30,579

-2,592

    Total unmatured debt

445,724

435,151

-10,573

  Total interest-bearing debt

588,905

577,078

-11,827

Total liabilities

632,416

611,953

-20,463

Assets

     

Cash and accounts receivable

18,612

8,933

-9,679

Foreign exchange accounts

50,010

50,141

131

Loans, investments and advances
 (net of allowances)

14,268

14,044

-224

 

Total assets

82,890

73,118

-9,772

 

Accumulated deficit (net public debt)

549,526

538,835

-10,691


Note: Assumes fiscal balance of $15 billion for 2000-01.

Net financial source of $0.9 billion for April 2001 to July 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 $0.1 billion in the first four months of 2001-02, compared to a net source of $1.3 billion in the same period in 2000-01.

With a budgetary surplus of $10.7 billion, a net requirement of $9.7 billion from non-budgetary transactions and a net requirement of $0.1 billion from foreign exchange transactions, there was a net financial source of $0.9 billion in the April 2001 to July 2001 period, compared to a net source of $4.4 billion in the same period in 2000-01.

Net borrowings down $10.6 billion for April 2001 to July 2001

Although there was a net financial source of only $0.9 billion in the first four months of 2001-02, the Government did reduce its holding of market debt by $10.6 billion through the drawing down of cash balances. 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 July 2001 they stood at $3.5 billion, down $9.7 billion from March 31, 2001.


Note to Readers:

The Government’s financial statements are presented on a modified accrual basis of accounting. This means that while most operating expenditures and non-tax revenues are recorded in the financial statements when they are incurred or earned (even if cash is not paid out or received until later), tax revenues are accounted for when cash is received and the entire amount of capital acquisitions, such as buildings, are treated as expenditures when acquired. In the February 1995 budget the Government announced its intention to adopt full accrual accounting. To this end, it has successfully introduced the Financial Information Strategy (FIS), a multi-year project which modernized financial systems and accounting practices. FIS consists of three components: the implementation of new financial systems, the adoption of full accrual accounting, and the provision of improved financial information to managers. In the 2000 budget the Government set a target date of 2001-02 for implementation of the first two components of FIS.

For the time being the monthly results for 2001-02 will continue to be presented on a modified accrual basis of accounting. However, the final audited financial statements for 2001-02, scheduled for release in the fall of 2002, will be presented on a full accrual basis of accounting. Previous years’ results will also be restated on a full accrual basis. For more information, see the backgrounder Implementation of Full Accrual Accounting in the Federal Government’s Financial Statements at www.fin.gc.ca.


1 The surplus for July 2000 was revised down from the originally reported estimate of $3.2 billion to $1.8 billion. This was due to a misclassification of revenues between July 2000 and August 2000. The August 2000 budgetary balance will be adjusted accordingly.  [Return]