- Fiscal Monitor 2003 -

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Highlights of financial results for January 2003

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Highlights

January 2003: budgetary surplus of $18 million

There was a budgetary surplus of $18 million in January 2003, compared to a surplus of $132 million in January 2002. On a year-over-year basis, budgetary revenues advanced by $471 million, or 3.4 per cent, while program spending was up $392 million, or 3.5 per cent, and public debt charges increased by $193 million, or 7.2  per cent.

April 2002 to January 2003: budgetary surplus of $11.2 billion

The budgetary surplus was estimated at $11.2 billion for the April 2002 to January 2003 period, down $4.1 billion from the surplus of $15.3 billion reported in the same period of 2001–02. The decline in the year-over-year surplus is largely attributable to developments affecting personal and corporate income tax revenues with respect to the 2001 tax year. This deterioration reflects the decline in the stock market in 2001, which resulted in higher refunds and lower settlement payments in April and May 2002, and higher corporate income tax refunds, as corporations are applying losses experienced in 2001 to taxes paid in previous years. The results for 2002–03 are also affected by stronger-than-expected goods and services tax (GST) revenue growth, which is due to both timing factors and a decline in GST refunds. It is expected that over the balance of the year, GST refunds will more closely reflect changes in gross collections, bringing net GST revenues more in line with the growth in the applicable GST tax base.

The monthly financial results are presented on a modified accrual basis of accounting. The Budget 2003 estimate for the year as a whole was presented on a full accrual basis of accounting. Taking the accounting differences and the impact of the policy initiatives for 2002–03 proposed in the budget into consideration, the results to date are consistent with the expected outcome for 2002–03 as set out in Budget 2003. The Fiscal Monitor will present monthly results on a full accrual basis beginning with the April 2003 Fiscal Monitor.

Chart 1 - Monthly surplus and deficit

Chart 2 - Revenues and expenditures

Table 1
Summary statement of transactions


  January April to January
  2002 2003 2001–02 2002–03

  ($ millions)
Budgetary transactions        
Revenues 13,908 14,379 145,638 144,108
Program spending -11,109 -11,501 -98,083 -103,569
Operating surplus 2,799 2,878 47,555 40,539
Public debt charges -2,667 -2,860 -32,280 -29,357
Budgetary balance (deficit/surplus) 132 18 15,275 11,182
Non-budgetary transactions 949 2,912 -14,746 -15,020
Financial requirements/source (excluding foreign exchange transactions) 1,081 2,930 529 -3,838
Foreign exchange transactions 152 -1 -491 1,290
Net financial balance -1,233 2,929 38 -2,548
Net change in borrowings -1,781 -1,938 -8,780 -4,582
Net change in cash balances -548 991 -8,742 -7,130
Cash balance at end of period     4,442 4,822

Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
Estimates for 2001–02 have been revised from those previously published.

January 2003: budgetary results

On a year-over-year basis, the budgetary surplus declined by $114 million to $18 million in January 2003. Budgetary revenues, however, increased by $0.5 billion, or 3.4 per cent.

On a year-over-year basis, program spending was up $0.4 billion, or 3.5 per cent.

Public debt charges, on a year-over year basis, increased $0.2 billion, or 7.2 per cent, due to adjustments made to the 2001–02 estimates to bring them more in line with the final outcome for the year as a whole.

Table 2
Budgetary revenues


  January   April to January  
  2002 2003 Change 2001–02 2002–03 Change

  ($ millions)

(%)

($ millions)

(%)

Income taxes            
Personal income tax 6,355 6,669 4.9 71,391 68,118 -4.6
Corporate income tax 1,649 1,631 -1.1 18,461 15,402 -16.6
Other income tax revenue 554 665 20.0 3,207 3,424 6.8
Total income tax 8,558 8,965 4.8 93,059 86,944 -6.6
Employment insurance premium revenues 1,374 1,442 4.9 14,371 14,474 0.7
Excise taxes and duties            
Goods and services tax 2,474 2,324 -6.1 21,664 25,024 15.5
Customs import duties 186 254 36.6 2,432 2,663 9.5
Other excise taxes and duties 719 748 4.0 7,299 7,937 8.7
Air Travellers Security Charge 30 295  
Total excise taxes and duties 3,379 3,356 -0.7 31,395 35,919 14.4
Total tax revenues 13,311 13,763 3.4 138,825 137,337 -1.1
Non-tax revenues 597 616 3.2 6,813 6,771 -0.6
Total budgetary revenues 13,908 14,379 3.4 145,638 144,108 -1.1

April 2002 to January 2003: budgetary results

Over the first 10 months of fiscal year 2002–03, the budgetary surplus was estimated at $11.2 billion, compared to a surplus of $15.3 billion reported in the same period of 2001–02. This decline reflects lower budgetary revenues, largely attributable to developments related to the 2001 tax year, and higher program spending. In contrast, public debt charges were lower.

Over the first 10 months of 2002–03, budgetary revenues were down $1.5 billion, or 1.1 per cent, on a year-over-year basis. Among the major components:

Table 3
Budgetary expenditures


  January   April to January  
  2002 2003 Change 2001–02 2002–03

Change


  ($ millions)

(%)

($ millions)

(%)

Transfer payments to:            
Persons            
   Elderly benefits 2,140 2,230 4.2 21,066 21,872 3.8
   Employment insurance benefits 1,548 1,407 -9.1 11,091 11,646 5.0
   Total 3,688 3,637 -1.4 32,157 33,518 4.2
Other levels of government            
   Canada Health and Social Transfer 1,442 1,550 7.5 14,416 15,500 7.5
   Fiscal transfers 1,034 1,052 1.7 10,397 10,431 0.3
   Alternative Payments for
     Standing Programs
-233 -210 -9.9 -2,098 -2,101 0.1
   Total 2,243 2,392 6.6 22,715 23,830 4.9
Direct program spending            
Subsidies and other transfers            
   Agriculture 43 328 662.8 609 694 14.0
   Foreign Affairs 243 225 -7.4 1,411 1,285 -8.9
   Health 145 192 32.4 1,075 1,244 15.7
   Human Resources Development 370 116 -68.6 1,378 1,207 -12.4
   Indian and Northern
   Development
299 393 31.4 3,354 3,388 1.0
   Industry and Regional 
    Development
71 152 114.1 1,183 1,482 25.3
   Veterans Affairs 138 147 6.5 1,268 1,410 11.2
   Other 383 494 29.0 2,081 2,172 4.4
   Total 1,692 2,047 21.0 12,359 12,882 4.2
Payments to Crown corporations            
   Canadian Broadcasting 
    Corporation
65 78 20.0 916 914 -0.2
   Canada Mortgage and
     Housing Corporation
158 159 0.6 1,680 1,578 -6.1
   Other 205 164 -20.0 1,585 1,655 4.4
   Total 428 401 -6.3 4,181 4,147 -0.8
Operating and capital expenditures            
   Defence 1,086 699 -35.6 7,820 7,986 2.1
   All other departmental 
    expenditures
1,972 2,325 17.9 18,851 21,206 12.5
   Total 3,058 3,024 -1.1 26,671 29,192 9.5
Total direct program spending 5,178 5,472 5.7 43,211 46,221 7.0
Total program expenditures 11,109 11,501 3.5 98,083 103,569 5.6
Public debt charges 2,667 2,860 7.2 32,280 29,357 -9.1
Total budgetary expenditures 13,776 14,361 4.2 130,363 132,926 2.0
Memorandum item:            
Total transfers 7,623 8,076 5.9 67,231 70,230 4.5

Over the first 10 months of 2002–03, program spending increased by $5.5 billion, or 5.6 per cent, compared to the same period of 2001–02.

Public debt charges declined by $2.9 billion, or 9.1 per cent, reflecting a decline in the stock of interest-bearing debt as well as a lower average effective interest rate on that debt.

Table 4
The budgetary balance and financial requirements/source


  January April to January
  2002 2003 2001–02 2002–03

  ($ millions)
Budgetary balance (deficit/surplus) 132 18 15,275 11,182
Loans, investments and advances        
Crown corporations 46 10 544 354
Other -208 -353 -1,338 -1,338
Total -162 -343 -794 -984
Specified purpose accounts        
Canada Pension Plan Account 320 344 -1,720 -924
Superannuation accounts -789 -175 -2,213 -614
Other 50 338 106 165
Total -419 507 -3,827 -1,373
Other transactions 1,530 2,748 -10,125 -12,663
Total non-budgetary transactions 949 2,912 -14,746 -15,020
Financial requirements/source (excluding foreign exchange transactions) 1,081 2,930 529 -3,838
Foreign exchange transactions 152 -1 -491 1,290
Net financial balance 1,233 2,929 38 -2,548

Table 5
Net financial balance and net borrowings


  January April to January
  2002 2003 2001–02 2002–03

  ($ millions)
Net financial balance 1,233 2,929 38 -2,548
Net increase (+)/decrease (-) in borrowings        
Payable in Canadian dollars        
   Marketable bonds 364 -460 -5,497 -9,317
   Canada Savings Bonds -118 -44 -2,737 -1,701
   Treasury bills -1,200 -1,350 5,100 8,800
   Other -25 -1 -47 -19
   Total -979 -1,855 -3,181 -2,237
Payable in foreign currencies        
   Marketable bonds 0 9 -1,576 -1,579
   Notes and loans -473   -514  
   Canada bills -329 -92 -3,336 -766
   Canada notes 0 0 -173 0
   Total -802 -83 -5,599 -2,345
Net change in borrowings -1,781 -1,938 -8,780 -4,582
Change in cash balance -548 991 -8,742 -7,130

Financial requirement of $3.8 billion (excluding foreign exchange transactions) for April 2002 to January 2003

The monthly budgetary balance in The Fiscal Monitor continues to be 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 $15.0 billion in the first 10 months of 2002–03, compared to a net requirement of $14.7 billion in the same period of 2001–02.

As a result, with a budgetary surplus of $11.2 billion and a net requirement of $15.0 billion from non-budgetary transactions, there was a financial requirement (excluding foreign exchange transactions) of $3.8  billion in the April 2002 to January 2003 period, compared to a source of $0.5 billion in the same period of 2001–02.

Net financial requirement of $2.5 billion for April 2002 to January 2003

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, and/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 source of $1.3 billion in the first 10 months of 2002–03, compared to a net requirement of $0.5 billion in the same period of 2001–02.

With a budgetary surplus of $11.2 billion, a net requirement of $15.0  billion from non-budgetary transactions and a net source of $1.3 billion from foreign exchange transactions, there was a net financial requirement of $2.5 billion in the April 2002 to January 2003 period, compared to a net source of $38 million in the same period of 2001–02.

Net borrowings down $4.6 billion for April 2002 to January 2003

To finance this net financial requirement of $2.5 billion, the Government reduced its cash balances by $7.1 billion. This also allowed it to reduce its net borrowings by $4.6 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.

Chart 3 - Budgetary balance

Chart 4 - Federal debt (accumulated deficit)

Note to readers:

The Government has implemented full accrual accounting in its annual financial statements. However, the monthly financial results for the balance of fiscal year 2002–03 will remain on a modified accrual basis of accounting. Until the monthly results are on full accrual, Table 6 "Condensed statement of assets and liabilities" will not be presented.