- Fiscal Monitor 2002 -

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Highlights of financial results for March 2002

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Highlights

March 2002: budgetary deficit of $4.9 billion

There was a budgetary deficit of $4.9 billion in March 2002, up $2.4 billion from the deficit of $2.5 billion reported in March 2001. The year-over-year increase primarily reflects the impact of the timing of receipts and payments between February and March, which served to overstate the February 2002 surplus. On a year-over-year basis budgetary revenues were $1.3 billion lower, primarily reflecting the timing of corporate income tax revenues, while program spending was $1.9 billion higher, attributable in part to the timing of employment insurance (EI) benefits. Public debt charges declined by $0.8 billion.

April 2001 to March 2002: budgetary surplus of $9.8 billion

The budgetary surplus was estimated at $9.8 billion for the April 2001 to March 2002 period, down $10.3 billion from the surplus of $20.1 billion reported in the same period of 2000-01. The lower surplus to date reflects the ongoing impact of the tax cuts and spending initiatives in the February 2000 budget and October 2000 Economic Statement and Budget Update, as well as those announced before and in the December 2001 budget. In addition, the slowdown in the economy in 2001 had an impact on most of the major revenue components and EI benefits, thereby adversely affecting the overall fiscal results, compared to the same period of 2000-01.

These are not the final results for the 2001-02 fiscal year. Still to come are the regular end-of-year accounting adjustments. Consistent with government accounting principles, these adjustments incorporate increases in program spending to include the costs of liabilities incurred during the fiscal year for which no payments were made in 2001-02. For example, the final audited outcome for 2000-01 was $17.1 billion, while the surplus to the end of March 2001 was $20.1 billion. The end-of-year accounting adjustments could be somewhat larger this year than in previous years as the monthly profile of program spending reflects the implementation of the new Financial Information Strategy, with a larger portion of spending likely being recorded at the end of the fiscal year than previously.

The results to date are somewhat better than expected at the time of the December 2001 budget, reflecting the better-than-expected economic performance in the fourth quarter of 2001, which continued into the first quarter of 2002.

March 2002: budgetary results

Budgetary revenues declined $1.3 billion, or 9.4 per cent, on a year-over-year basis. All major components recorded declines, with the exception of personal income tax revenues.

Program spending was up $1.9 billion, or 16.0 per cent, on a year-over-year basis.

Public debt charges, on a year-over year basis, were down $0.8 billion, or 22.6 per cent, primarily reflecting adjustments related to previous months.

Table 1
Summary statement of transactions


March

April to March

2001

2002

2000-01

2001-02


($ millions)

Budgetary transactions

Revenues

13,277

12,024

177,006

174,130

Program spending

-12,201

-14,150

-115,542

-125,643

 

Operating surplus

1,076

-2,126

61,464

48,487

Public debt charges

-3,564

-2,757

-41,412

-38,709

 

Budgetary balance (deficit/surplus)

-2,488

-4,883

20,052

9,778

Non-budgetary transactions

6,317

7,327

-485

-3,969

Financial requirements/source (excluding foreign exchange transactions)

3,829

2,444

19,567

5,809

Foreign exchange transactions

-4,716

-732

-8,654

-1,849

 

Net financial balance

-887

1,712

10,913

3,960

Net change in borrowings

582

267

-10,682

-5,189

Net change in cash balances

-305

1,979

231

-1,229

Cash balance at end of period

13,179

11,950


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

Table 2 
Budgetary revenues


March April to March
2001 2002 Change 2000-01 2001-02 Change

($ millions)

(%)

($ millions)

(%)

Income taxes
Personal income tax 4,546 4,628 1.8 81,350 81,760 0.5
Corporate income tax 2,349 1,272 -45.8 27,619 24,637 -10.8
Other income tax revenue 692 655 -5.3 4,216 4,038 -4.2
 
Total income tax 7,587 6,555 -13.6 113,185 110,435 -2.4
Employment insurance premium revenues 1,839 1,774 -3.5 18,732 17,960 -4.1
Excise taxes and duties
Goods and services tax 1,619 1,582 -2.3 24,812 25,275 1.9
Customs import duties 274 220 -19.7 2,791 2,979 6.7
Sales and excise taxes 674 700 3.9 8,224 8,641 5.1
 
Total excise taxes and duties 2,567 2,502 -2.5 35,827 36,895 3.0
 
Total tax revenues 11,993 10,831 -9.7 167,744 165,290 -1.5
Non-tax revenues 1,284 1,193 -7.1 9,262 8,840 -4.6
 
Total budgetary revenues 13,277 12,024 -9.4  177,006 174,130 -1.6

April 2001 to March 2002: budgetary results

Over the April 2001 to March 2002 period the budgetary surplus was estimated at $9.8 billion, down $10.3 billion from the surplus of $20.1 billion reported in the same period of 2000-01. Program spending was up $10.1 billion while budgetary revenues were down $2.9 billion. Dampening the impact of these factors on the budgetary balance were lower public debt charges, down $2.7 billion.

Among the major components of budgetary revenues, on a year-over-year basis:

Among the major components of program spending, on a year-over-year basis:

The year-over-year decline in public debt charges of $2.7 billion reflects the impact of declines in both the stock of interest-bearing debt and the average effective interest rate on that debt.

Table 3
Budgetary expenditures


March April to March
2001 2002 Change 2000-01 2001-02 Change

($ millions)

(%)

($ millions)

(%)

Transfer payments to:
Persons
  Elderly benefits 2,057 2,157 4.9 24,245 25,364 4.6
  Employment insurance benefits 1,030 1,479 43.6 10,999 13,852 25.9
  Relief for Heating Expenses 1,434
 
  Total 3,087 3,636 17.8 36,678 39,216 6.9
Other levels of government
  Canada Health and Social
   Transfer
1,125 1,442 28.2 13,500 17,300 28.1
  Fiscal transfers 907 713 -21.4 12,303 12,146 -1.3
  Medical Equipment Fund 1,000
  Alternative Payments for 
  Standing Programs
-206 -232 12.6 -2,466 -2,563 3.9
 
  Total 1,826 1,923 5.3 24,337 26,883 10.5
Direct program spending
Subsidies and other transfers
  Agriculture 633 584 -7.7 1,232 1,298 5.4
  Foreign Affairs 291 566 94.5 1,713 2,131 24.4
  Health 97 317 226.8 1,107 1,486 34.2
  Human Resources Development 363 165 -54.5 1,685 1,711 1.5
  Indian and Northern
   Development
144 345 139.6 3,886 3,944 1.5
  Industry and Regional
   Development
407 836 105.4 1,720 2,157 25.4
  Veterans Affairs 125 144 15.2 1,458 1,547 6.1
  Other 652 586 -10.1 2,635 3,009 14.2
 
  Total 2,712 3,543 30.6 15,436 17,283 12.0
Payments to Crown corporations
  Canadian Broadcasting
  Corporation
43 15 -65.1 902 981 8.8
  Canada Mortgage and
  Housing Corporation
320 168 -47.5 1,990 1,923 -3.4
  Other 91 188 106.6 1,383 1,667 20.5
 
  Total 454 371 -18.3 4,275 4,571 6.9
Operating and capital expenditures
  Defence 1,436 1,623 13.0 10,992 12,301 11.9
  All other departmental
  expenditures
2,686 3,054 13.7 23,824 25,389 6.6
 
  Total 4,122 4,677 13.5 34,816 37,690 8.3
Total direct program spending 7,288 8,591 17.9 54,527 59,544 9.2
Total program expenditures 12,201 14,150 16.0 115,542 125,643 8.7
Public debt charges 3,564 2,757 -22.6 41,412 38,709 -6.5
 
Total budgetary expenditures 15,765 16,907 7.2 156,954 164,352 4.7

Memorandum item:
Total transfers
7,625 9,102 19.4 76,451 83,382 9.1

Financial source of $5.8 billion (excluding foreign exchange transactions) for April 2001 to March 2002

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 $4.0 billion in the April 2001 to March 2002 period, compared to a net requirement of $0.5 billion in the same period of 2000-01. The increase to date is largely attributable to transfers of applicable pension assets to those Crown corporations setting up their own pension plans.

As a result, with a budgetary surplus of $9.8 billion and a net requirement of $4.0 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $5.8 billion in the April 2001 to March 2002 period, compared to a source of $19.6 billion in the same period of 2000-01.

Table 4
The budgetary balance and financial requirements/source


March April to March
2001 2002 2000-01 2001-02

($ millions)
Budgetary balance (deficit/surplus) -2,488 -4,883 20,052 9,778
Loans, investments and advances
Crown corporations 99 371 504 923
Other -87 -111 -976 -1,268

Total 12 260 -472 -345
Specified purpose accounts
Canada Pension Plan Account 578 1,053 192 365
Superannuation accounts -24 -249 1,346 -1,976
Other 8 5 117 201

Total 562 809 1,655 -1,410

Other transactions 5,743 6,258 -1,668 -2,214
Total non-budgetary transactions 6,317 7,327 -485 -3,969
Financial requirements/ source (excluding foreign exchange transactions) 3,829 2,444 19,567 5,809
Foreign exchange transactions -4,716 -732 -8,654 -1,849

Net financial balance -887 1,712 10,913 3,960

Table 5
Net financial balance and net borrowings


March April to March
2001 2002 2000-01 2001-02

($ millions)
Net financial balance -887 1,712 10,913 3,960
Net increase (+)/ decrease (-) 
in borrowings
Payable in Canadian dollars
  Marketable bonds -9,694 916 700 -1,598
  Treasury bills 7,000 -200 -11,150 5,500
  Canada Savings Bonds 18 -16 -736 -2,886
  Other -17 -20 -79 -83
 
  Total -2,693 680 -11,265 933
Payable in foreign currencies
  Marketable bonds 3,003 218 -1,164 -1,358
  Notes and loans -1,385 0 0 -514
  Canada bills 1,094 -584 1,220 -3,872
  Canada notes 563 -47 527 -378
 
Total 3,275 -413 583 -6,122
 
Net change in borrowings 582 267 -10,682 -5,189
Change in cash balance -305 1,979 231 -1,229

Table 6
Condensed statement of assets and liabilities


March 31, 2001 March 31, 2002 Change

($ millions)
Liabilities
Accounts payable, accruals and allowances 43,644 38,270 -5,374
Interest-bearing debt
  Pension and other accounts
    Public sector pensions 129,185 127,209 -1,976
    Canada Pension Plan 
    (net of securities)
6,391 6,756 365
    Other pension and other
    accounts
7,253 7,454 201
 
    Total pension and other
    accounts
142,829 141,419 -1,410
  Unmatured debt
   Payable in Canadian dollars
    Marketable bonds 294,973 293,375 -1,598
    Treasury bills 88,700 94,200 5,500
    Canada Savings Bonds 26,099 23,213 -2,886
    Other 3,473 3,391 -82
 
    Subtotal 413,245 414,180 935
   Payable in foreign currencies 33,158 27,036 -6,122
   Total unmatured debt 446,403 441,215 -5,188
  Total interest-bearing debt 589,232 582,634 -6,598
Total liabilities 632,876 620,904 -11,973
Assets
Cash and accounts receivable 19,186 14,796 -4,390
Foreign exchange accounts 50,270 52,119 1,849
Loans, investments and advances
 (net of allowances) 16,042 16,387 345
   
Total assets 85,498 83,303 -2,196
 
Accumulated deficit (net public debt) 547,378 537,601 -9,778

Net financial source of $4.0 billion for April 2001 to March 2002

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 $1.8 billion in the April 2001 to March 2002 period, compared to a net requirement of $8.7 billion in the same period of 2000-01.

With a budgetary surplus of $9.8 billion, a net requirement of $4.0 billion from non-budgetary transactions and a net requirement of $1.8 billion from foreign exchange transactions, there was a net financial source of $4.0 billion in the April 2001 to March 2002 period, compared to a net source of $10.9 billion in the same period of 2000-01.

Net borrowings down $5.2 billion for April 2001 to March 2002

In 2001-02 the Government reduced its holding of market debt by $5.2 billion by applying the net financial source of $4.0 billion and drawing down its cash balances by $1.2 billion. 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 March 2002 they stood at $12.0 billion.