The Fiscal Monitor

Highlights of financial results for March 2009

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Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

March 2009

There was a budgetary deficit of $3.6 billion in March 2009, compared to a deficit of $1.2 billion in March 2008.

Budgetary revenues decreased by $3.1 billion, or 14.4 per cent, from March 2008.

• Personal income tax revenues decreased by $1.3 billion, or 12.4 per cent, reflecting lower employment and personal income tax reductions announced in Canada’s Economic Action Plan.
• Corporate income tax revenues were down $2.1 billion, or 46.8 per cent, reflecting large refunds issued in the month.
• Other income tax revenues—withholdings from non-residents—decreased by $0.1 billion, or 23.9 per cent.
• Excise taxes and duties were down $0.2 billion, or 9.2 per cent. GST revenues declined by $0.3 billion, or 16.7 per cent. Customs import duties and sales and excise taxes were each up $12 million, and revenues from the Air Travellers Security Charge were unchanged.
• Employment Insurance (EI) premium revenues were up $0.1 billion, or 3.5 per cent. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sales of goods and services, returns on investments, foreign exchange revenues and miscellaneous revenues, were up $0.5 billion.

Program expenses in March 2009 were $19.8 billion, down $0.6 billion, or 2.8 per cent, from March 2008, reflecting lower operating expenses of departments and agencies, partially offset by higher transfer payments.

In March 2009, transfer payments were up $0.5 billion, or 3.8 per cent, from March 2008.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.9 billion, or 17.6 per cent. Elderly benefits increased by $0.2 billion, or 5.8 per cent. EI benefits increased by $0.7 billion, or 55.9 per cent, reflecting significantly higher regular benefits. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, increased by $5 million.
• Major transfers to other levels of government, consisting of federal transfers in support of health and other social programs (Canada Health Transfer and Canada Social Transfer), fiscal transfers, transfers to provinces on behalf of Canada’s cities and communities, and Alternative Payments for Standing Programs, were down $1.0 billion, or 22.3 per cent, reflecting transfers under the Community Development Trust announced in Budget 2008, which were included in the March 2008 results.
• Subsidies and other transfers increased by $0.6 billion, or 21.3 per cent, reflecting increases across a number of departments and agencies including the Canadian International Development Agency, Indian and Northern Affairs Canada, Natural Resources Canada and Infrastructure Canada.

Other program expenses consist of operating expenses of Crown corporations, departments and agencies, including National Defence, and also reflect the ongoing assessment of the Government’s liabilities. These expenses decreased by $1.0 billion, or 13.8 per cent, over the prior year.

Public debt charges were $0.2 billion lower than in March 2008, as the impact of the increase in the stock of interest-bearing debt was more than offset by a decrease in the average effective interest rate on that stock.

April 2008 to March 2009

For the April 2008 to March 2009 period, there was a budgetary deficit of $2.2 billion, compared to a surplus of $11.4 billion reported during the same period of 2007–08.

Budgetary revenues decreased by $9.2 billion, or 3.8 per cent, to $231.3 billion.

• Personal income tax revenues rose $2.6 billion, or 2.4 per cent.
• Corporate income tax revenues were down $11.1 billion, or 27.2 per cent, reflecting both weaker profits and the impact of ongoing tax reductions.
• Other income tax revenues rose $0.5 billion, or 8.1 per cent.
• Excise taxes and duties decreased by $4.3 billion, or 10.0 per cent. GST revenues were down $4.4 billion, or 15.0 per cent, reflecting the 1-percentage-point reduction in the GST rate effective January 1, 2008. Customs import duties increased by $0.2 billion, sales and excise taxes were down $0.1 billion, and revenues from the Air Travellers Security Charge were down $3 million.
• EI premium revenues were up $0.2 billion, or 1.4 per cent, as the decline in the premium rate from $1.80 to $1.73 per $100 of insurable earnings, effective January 1, 2008, was more than offset by gains in employment and wages and salaries.
• Other revenues rose $3.0 billion, or 13.5 per cent. As noted in the October Fiscal Monitor, other revenues (and corresponding operating expenses) for 2007–08 have been restated. This adjustment has no net impact on the budgetary balance.

Program expenses for April 2008 to March 2009 were $202.6 billion, up $6.8 billion, or 3.5 per cent, from the same period the previous year, reflecting higher transfer payments, offset slightly by a decrease in other program expenses.

Transfer payments for April 2008 to March 2009 were up $7.0 billion, or 5.5 per cent, from the same period the previous year.

• Major transfers to persons were up $3.4 billion, or 5.9 per cent. Elderly benefits increased by $1.4 billion, or 4.5 per cent, and EI benefits by $2.0 billion, or 13.9 per cent. Children’s benefits increased by 0.4 per cent.
• Major transfers to other levels of government were up $1.5 billion, or 3.4 per cent, primarily reflecting legislated growth in the Canada Health Transfer, Canada Social Transfer and Equalization.
• Subsidies and other transfers were up $2.0 billion, or 8.1 per cent, mainly reflecting increases in payments related to international assistance, support for labour market training, and higher transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses decreased by $0.2 billion, or 0.4 per cent, from the previous year’s level.

Public debt charges decreased by $2.3 billion, or 6.8 per cent, reflecting lower interest rates.

Financial requirement of $89.5 billion for April 2008 to March 2009

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 contrast, the 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 payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary deficit of $2.2 billion and a requirement of $87.2 billion from non-budgetary transactions, there was a financial requirement of $89.5  billion in the April to March period of 2008–09 compared to a financial source of $13.6 billion in the same period of 2007–08. This year-over-year difference reflects the Budget 2007 announcement that the Government would meet all of the borrowing needs of Canada Mortgage and Housing Corporation, the Business Development Bank of Canada and Farm Credit Canada through direct lending in order to reduce overall borrowing costs and improve the liquidity of the government securities market. The difference also reflects $55.0 billion in initial purchases of insured mortgage pools through Canada Mortgage and Housing Corporation under the Insured Mortgage Purchase Program to support the availability of longer-term credit.

Net financing activities up $123.3 billion

The Government financed this financial requirement of $89.5 billion and increased its cash balances by $33.8 billion by increasing unmatured debt by $123.3 billion. The increase in debt was achieved largely through the issuance of treasury bills and marketable bonds. Cash balances at the end of March 2009 stood at $45.0 billion, $33.8 billion above their level at the end of March 2008. The increase in cash balances over the prior year mainly reflects increased balances at the Bank of Canada to support the Bank’s operations to provide liquidity to financial markets and to cover some of the Government’s own funding needs for the Insured Mortgage Purchase Program.

For inquiries about this publication, contact Chris Forbes at 613-995-6391.
May 2009