- Fiscal Monitor 2003 -

Archived - The Fiscal Monitor

Highlights of financial results for April 2003 

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Budgetary surplus of $0.4 billion in April 2003

There was a budgetary surplus of $0.4 billion in April 2003, up from a restated deficit of $0.2 billion in April 2002. This $0.6-billion year-over-year improvement in the budgetary balance was attributable to higher budgetary revenues (up $1.1 billion) and lower public debt charges (down $0.2 billion), offset in part by higher program expenses (up $0.7  billion).

The increase in budgetary revenues, on a year-over-year basis, was due primarily to higher goods and services and corporate income tax revenues.

• Goods and services tax revenues were up $0.5 billion, or 25.0  per cent, reflecting both an increase in the base subject to taxation and lower refunds.
• Corporate income tax revenues were up $0.4 billion, or 29.4 per cent, attributable to higher installment payments–reflecting the strong growth in corporate profits in 2003–and lower refunds. As noted in the 2003 budget, the data to convert corporate tax revenues to accruals are not available in order to present the financial statements in a timely manner. As such, cash is used as a proxy for the accrual numbers.
• Among the remaining major revenue components, personal income tax collections were up marginally ($0.1 billion, or 1.9 per cent), as employment, and therefore the number of Canadians paying taxes, was up over last year. Employment insurance premiums were marginally higher, also attributable to the increase in employment, which more than offset the reduction in premium rates (the employee rate for 2003 is $2.10 per $100 of insurable earnings, compared to $2.20 in 2002).

On a year-over-year basis, the $0.7-billion increase in program expenses was largely due to higher transfer payments, up $0.5 billion.

Among the major transfers:

• Major transfers to persons were up $0.1 billion, or 3.3 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 higher regular benefits, reflecting an increase in the number of beneficiaries.
• Major transfers to other levels of government were up $0.2 billion, or 7.4 per cent, primarily attributable to higher cash transfers under the Canada Health and Social Transfer, reflecting the February 2003 agreement reached by first ministers to increase funding from $18.6 billion in 2002–03 to $20.3 billion in 2003–04.
• Subsidies and other transfers increased by $0.2 billion, primarily reflecting higher international assistance transfers.

Other program expenses consist of operating expenses for departments and agencies, including defence and Crown corporations. On a year-over-year basis, these expenses were up $0.2 billion, or 6.2 per cent, reflecting the impact of increased operating costs as well as policy initiatives announced in previous budgets.

Public debt charges were down $0.2 billion, or 6.0 per cent, attributable to both a decline in the stock of interest-bearing debt and a lower average effective interest rate on that debt.

Financial requirement of $4.9 billion in April 2003

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable or incurred, regardless of when the cash is received or paid. In addition, the budgetary balance includes only those activities over which the Government has legislative control.

In contrast, financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets, and its loans, financial investments and advances, as well as from other activities, including paying accounts payable and collecting accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirements is recorded in non-budgetary transactions.

Non-budgetary transactions resulted in a net requirement of $5.3 billion in April 2003, down $0.3 billion from the requirement in April 2002. Traditionally, there is a large requirement in the month of April, primarily reflecting the payment of accounts payable.

With a budgetary surplus of $0.4 billion and a net requirement of $5.3 billion from non-budgetary transactions, there was a financial requirement of $4.9 billion in April 2003, down $0.3 billion from April 2002.

Net financing activities down $4.3 billion

This financial requirement of $4.9 billion was financed by a draw down in cash balances. In addition, the Government reduced its cash balances by a further $4.3 billion to lower its interest-bearing debt. Cash balances at the end of April 2003 stood at $5.5 billion, down $9.1 billion from the previous period. 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.

Table 1
Summary statement of transactions

Table 2
Budgetary revenues

Table 3
Budgetary expenditures

Table 4
The budgetary balance and financial source/requirement

Table 5
Financial source/requirement and net financing activities