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Highlights of financial results for April and May 2009

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

April and May 2009 budgetary results

Through the first two months of the 2009–10 fiscal year, there was a budgetary deficit of $7.5 billion, compared to a $0.9-billion deficit reported during the same period of 2008–09.

Revenues declined by $2.6 billion, or 6.9 per cent, to $34.5 billion.

• Personal income tax revenues were down $0.3 billion, or 1.5 per cent, reflecting personal income tax reductions announced in Canada's Economic Action Plan, including increases in the basic personal amount and personal income tax bracket thresholds, and the Home Renovation Tax Credit.
• Corporate income tax revenues were down $1.3 billion, or 23.5 per cent, as a result of lower installment payments in both months.
• Other income tax receipts—withholdings from non-residents—rose $0.2 billion, or 20.0 per cent.
• Excise taxes and duties were down $1.5 billion, or 26.1 per cent, primarily due to a $1.4-billion, or 37.9 per cent, decline in GST revenues. As a value-added tax, the GST can yield volatile net collections on a month-to-month basis due to timing differences between GST owed to the Government and credits claimed for GST paid on inputs. Customs import duties were down $0.1 billion, energy taxes declined by $39 million, and other excise taxes and duties were down $15 million. Revenues from the Air Travellers Security Charge were virtually unchanged.
• EI premium revenues were up $0.1 billion, or 2.6 per cent. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009.
• Other revenues, consisting of net profits of enterprise Crown corporations, revenues of consolidated Crown corporations, sales of goods and services, return on investments, and foreign exchange revenues, were up $0.3 billion, or 9.6 per cent.

Program expenses in the April to May 2009 period were $36.9 billion, up $4.4 billion, or 13.4 per cent, from the prior year, reflecting an increase in transfer payments, partially offset by a slight decline in operating expenses of departments and agencies.

Transfer payments increased $4.5 billion, or 20.6 per cent.

• Major transfers to persons, consisting of elderly benefits, EI benefits and children's benefits, rose $1.6 billion, or 15.7 per cent, on a year-over-year basis. Elderly benefits increased 5.5 per cent. EI benefit payments increased $1.3 billion, or 50.5 per cent, reflecting significantly higher regular benefits. Children's benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, remained relatively stable compared to the prior year.
• Major transfers to other levels of government were up $1.6 billion or 19.8 per cent over the prior year, reflecting both a $1.0-billion increase in infrastructure funding provided to Canada's cities and communities and legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization. The $1.0-billion increase in infrastructure spending is due to the accelerated payment of the previously announced doubling of the gas tax transfer to provinces and municipalities, as of April 1, 2009.
• Subsidies and other transfers were up $1.4 billion, or 34.4 per cent, largely reflecting the impact of support for the automotive industry.

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. On a year-over-year basis, these expenses decreased $0.1 billion, or 1.3 per cent.

Public debt charges decreased $0.3 billion, or 4.9 per cent, largely reflecting a lower effective interest rate on the stock of interest-bearing debt.

Financial requirement of $13.1 billion for April to May 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 $7.5 billion and a requirement of $5.6 billion from non-budgetary transactions, there was a financial requirement of $13.1 billion in the April to May period of 2009–10. This was up $0.4 billion from the $12.7-billion financial requirement in the same period the previous year. The year-over-year difference is mainly attributable to the $6.7-billion decline in the budgetary balance, which was largely offset by an increased financial source from foreign exchange activities reflecting the impact of exchange rate movements on the Canadian-dollar value of foreign-denominated assets.

Net financing activities down $8.3 billion

The Government financed this financial requirement of $13.1 billion and reduced market debt by $8.3 billion by reducing its cash balances by $21.4 billion. The decrease in market debt was achieved largely through a reduction in treasury bills and foreign currency borrowings. 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. The decrease in cash balances mainly reflects decreased balances at the Bank of Canada to support the Bank's operations to provide liquidity to financial markets. Cash balances at the end of May 2009 stood at $23.6 billion, $10.2 billion above their level at the end of May 2008.

For inquiries about this publication, contact Phil King at 613-992-3448.
July 2009