- Fiscal Monitor 2002 -

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Highlights of financial results for April 2002

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Budgetary surplus of $0.9 billion in April 2002

There was a budgetary surplus of $0.9 billion in April 2002, down $2.6 billion from the revised surplus of $3.5 billion in April 2001.1 On a year-over-year basis, the lower surplus was attributable to a decline in budgetary revenues (down $2.4 billion) and higher program spending (up $0.8  billion). The impact of these developments was partially offset by lower public debt charges (down $0.5 billion).

The decline of $2.4 billion, or 14.6 per cent, in budgetary revenues on a year-over year basis was spread throughout all the major components except excise taxes and duties.

  • Personal income tax collections were down $2.1 billion, or 24.6 per cent. Most of this decline was attributable to lower final tax settlement payments and higher refunds with respect to the 2001 tax year. Final tax settlement payments in April 2001 were extraordinarily high, reflecting, among others things, strong increases in capital gains in the 2000 tax year. However, the decline in the stock market in 2001, coupled with the impact of lower interest rates on other components of investment income, resulted in much lower final tax settlement payments and higher refunds. Monthly deductions from employment income were somewhat lower, reflecting the timing of receipts and the impact of the tax reduction measures announced in the February 2000 budget and October 2000 Economic Statement and Budget Update.

  • Corporate income tax collections declined $0.7 billion, or 30.5 per cent, primarily attributable to higher refunds reflecting the weakness in corporate profits in 2001.

  • Employment insurance (EI) premium revenues were down 2.7 per cent, largely due to the decline in premium rates (the employee rate for 2002 is $2.20 per $100 of insurable earnings compared to $2.25 in 2001).

  • Excise taxes and duties were up $0.6 billion, or 23.7 per cent, primarily reflecting strong growth in imports, which resulted in higher GST revenues and customs import duties. Sales and excise taxes were also higher, primarily attributable to the increase in tobacco taxes.

  • Non-tax revenues were down 14.4 per cent.

Program spending increased by $0.8 billion, or 8.7 per cent, on a year-over-year basis.

  • Major transfers to persons were up $0.4 billion, or 12.3 per cent. The increase in elderly benefits reflects an increase in the number of individuals eligible for benefits and higher average benefits, which are indexed to inflation. The increase in EI benefits was attributable to both higher regular benefits, reflecting an increase in the number of beneficiaries, and program enhancements.

  • Major transfers to other levels of government were up $53 million, or 2.4 per cent, attributable to higher cash transfers under the Canada Health and Social Transfer, reflecting the September 2000 agreement reached by first ministers to increase base funding from $17.3 billion in 2001-02 to $18.6 billion in 2002-03. The decline in fiscal transfers was primarily attributable to the timing of payments, which should be reversed in future months.

  • Direct program spending, consisting of total program spending less major transfers to persons and other levels of government, increased by $0.4 billion, or 9.2 per cent. Subsidies and other transfers and payments to Crown corporations declined, while operating and capital expenditures were higher. The monthly fluctuations in these components are due in large part to the timing of payments.

Public debt charges were down $0.5 billion, or 15.2 per cent, attributable to both a decline in the stock of interest-bearing debt and a lower average effective interest rate on that debt.

Table 1
Summary statement of transactions

2001 2002

($ millions)
Budgetary transactions
Revenues 16,126 13,776
Program spending -9,226 -10,029

Operating surplus 6,900 3,747
Public debt charges -3,389 -2,875

Budgetary balance (deficit/surplus) 3,511 872
Non-budgetary transactions -3,952 -5,552
Financial requirements/source
  (excluding foreign exchange transactions)
-441 -4,680
Foreign exchange transactions 158 -668

Net financial balance -283 -5,348
Net change in borrowings 70 -940
Net change in cash balances -213 -6,288
Cash balance at end of period 5,818 12,965

Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds. Estimates for April 2001 have been revised from those previously published.

Financial requirement of $4.7 billion (excluding foreign exchange transactions) in April 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 $5.6 billion in April 2002, up from a net requirement of $4.0 billion in April 2001. The higher requirement is primarily due to timing factors affecting the other transactions component.

With a budgetary surplus of $0.9 billion and a net requirement of $5.6 billion from non-budgetary transactions, there was a financial requirement (excluding foreign exchange transactions) of $4.7 billion in April 2002, compared to a requirement of $0.4 billion in April 2001.

Table 2
Budgetary revenues





($ millions)


Income taxes
Personal income tax 8,539 6,436 -24.6
Corporate income tax 2,146 1,492 -30.5
Other income tax revenue 364 332 -8.8

Total income tax 11,049 8,260 -25.2
Employment insurance premium revenues 1,809 1,760 -2.7
Excise taxes and duties
Goods and services tax 1,703 2,151 26.3
Customs import duties 169 257 52.1
Sales and excise taxes 645 705 9.3

Total excise taxes and duties 2,517 3,113 23.7

Total tax revenues 15,375 13,133 -14.6
Non-tax revenues 751 643 -14.4

Total budgetary revenues 16,126 13,776 -14.6

Net financial requirement of $5.3 billion in April 2002

Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account (EFA). The objectives of the EFA are to provide general foreign currency liquidity for the Government and promote orderly conditions in the foreign exchange market. The EFA contains foreign currency investments, the Government’s gold holdings and assets related to Canada’s commitment to the International Monetary Fund (IMF). Increases in the level of the reserves through borrowings, contributions to the IMF or selling of Canadian dollars represent a requirement. Conversely, decreases in the level of reserves represent a source of funds. Taking all of these factors into account, there was a net requirement of $0.7 billion in April 2002, compared to a net source of $0.2 billion in April 2001.

With a budgetary surplus of $0.9 billion, a net requirement of $5.6 billion from non-budgetary transactions and a net requirement of $0.7 billion from foreign exchange transactions, there was a net financial requirement of $5.3 billion in April 2002, compared to a net requirement of $0.3 billion in April 2001.

Table 3
Budgetary expenditures

2001 2002 Change

($ millions)


Transfer payments to:
   Elderly benefits 2,063 2,166 5.0
   Employment insurance benefits 1,113 1,402 26.0

   Total 3,176 3,568 12.3
Other levels of government
   Canada Health and Social Transfer 1,441 1,550 7.6
   Fiscal transfers 923 877 -5.0
   Alternative Payments for Standing Programs -200 -210 5.0

   Total 2,164 2,217 2.4
Direct program spending
Subsidies and other transfers
   Agriculture 38 16 -57.9
   Foreign Affairs 122 41 -66.4
   Health 10 110 1,000.0
   Human Resources Development 26 70 169.2
   Indian and Northern Development 690 609 -11.7
   Industry and Regional Development 112 109 -2.7
   Veterans Affairs 118 143 21.2
   Other 306 163 -46.7

   Total 1,422 1,261 -11.3
Payments to Crown corporations
   Canadian Broadcasting Corporation 200 182 -9.0
   Canada Mortgage and Housing Corporation 158 171 8.2
   Other 221 225 1.8

   Total 579 578 -0.2
Operating and capital expenditures
   Defence 505 580 14.9
   All other departmental expenditures 1,380 1,825 32.2

   Total 1,885 2,405 27.6
Total direct program spending 3,886 4,244 9.2
Total program expenditures 9,226 10,029 8.7
Public debt charges 3,389 2,875 -15.2

Total budgetary expenditures 12,615 12,904 2.3

Memorandum item: Total transfers 6,762 7,046 4.2

Table 4
The budgetary balance and financial requirements/source

2001 2002

($ millions)
Budgetary balance (deficit/surplus) 3,511 872
Loans, investments and advances
Crown corporations 132 13
Other -14 8

Total 118 21
Specified purpose accounts
Canada Pension Plan Account -400 -129
Superannuation accounts 46 -45
Other 21 -38

Total -333 -212
Other transactions -3,737 -5,361

Total non-budgetary transactions -3,952 -5,552
Financial requirements/source (excluding foreign exchange transactions) -441 -4,680
Foreign exchange transactions 158 -668

Net financial balance -283 -5,348

Table 5
Net financial balance and net borrowings

2001 2002

($ millions)
Net financial balance -283 -5,348
Net increase (+)/decrease (-) in borrowings
Payable in Canadian dollars
   Marketable bonds 1,371 -5,200
   Treasury bills -700 4,300
   Canada Savings Bonds -1 -57
   Other 0 0

   Total 670 -957
Payable in foreign currencies
   Marketable bonds 0 0
   Notes and loans 0 0
   Canada bills -490 17
   Canada notes -110 0

   Total -600 17

Net change in borrowings 70 -940
Change in cash balance -213 -6,288

Table 6
Condensed statement of assets and liabilities

March 31, 2002 April 30, 

($ millions)
Accounts payable, accruals
  and allowances
41,014 39,486 -1,528
Interest-bearing debt
   Pension and other accounts
      Public sector pensions 127,209 127,164 -45
      Canada Pension Plan
        (net of securities)
6,756 6,627 -129
      Other pension and other accounts 7,454 7,416 -38

      Total pension and other accounts 141,419 141,207 -212
   Unmatured debt
      Payable in Canadian dollars
         Marketable bonds 293,865 288,665 -5,200
         Treasury bills 94,200 98,500 4,300
         Canada Savings Bonds 23,759 23,702 -57
         Other 3,390 3,390 0

         Subtotal 415,214 414,257 -957
      Payable in foreign currencies 27,033 27,050 17
      Total unmatured debt 442,247 441,307 -940
   Total interest-bearing debt 583,666 582,514 -1,152
Total liabilities 624,680 622,000 -2,680
Cash and accounts receivable 14,796 13,635 -1,161
Foreign exchange accounts 52,119 51,451 -668
Loans, investments and advances
  (net of allowances)
16,387 16,408 21

Total assets 83,302 81,494 -1,808

Accumulated deficit
  (net public debt)
541,378 540,506 -872

1 Assumes a fiscal balance of $6 billion for 2001-02.

Net borrowings down slightly

This financial requirement was financed by a drawdown in cash balances of $6.3 billion, which also resulted in a decrease of $0.9 billion in net borrowings. Cash balances at the end of April 2002 stood at $13.0 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.

1 The budgetary surplus for April 2001 was originally estimated at $4.6 billion. However, this result was affected by systems problems relating to personal income tax and goods and services tax (GST) refunds. This had the effect of overstating the April 2001 surplus by $1.1 billion and understating the surplus in the May and June period by a comparable amount. This will have no impact on the final results for the year as a whole. [Return]