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September 2009: budgetary deficit of $5.0 billion

There was a budgetary deficit of $5.0 billion in September 2009, compared to a deficit of $0.6 billion in September 2008. The September 2009 deficit reflects the impact of the weaker economy on the Government's finances, as well as measures introduced under Canada's Economic Action Plan. Revenues were down $3.6 billion from September 2008, driven by declines in income tax revenues, as well as goods and services tax (GST) and other revenues. Program expenses increased by $1.1 billion compared to September 2008, largely reflecting higher Employment Insurance (EI) benefit payments and higher transfers to other levels of government. Public debt charges decreased by $0.3 billion compared to September 2008 due to lower average effective interest rates.

April to September 2009: budgetary deficit of $28.6 billion

For the first half of the 2009–10 fiscal year, the budgetary deficit was $28.6 billion, compared to a budgetary surplus of $0.5 billion reported in the same period of 2008–09. Over $11 billion of the $28.6-billion deficit was attributable to actions taken under Canada's Economic Action Plan, including tax reductions, enhanced EI benefits and support for the automotive industry. Revenues were down $14.2 billion, or 12.3 per cent, reflecting declines across most revenue streams, particularly personal and corporate income tax and GST revenues. The decline in revenues through September is generally in line with the projected quarterly pattern of economic growth, in which nominal gross domestic product (GDP), the broadest single measure of the tax base, is expected to be weak through the first six months of the fiscal year before strengthening in the October to December timeframe. The impact of the economic profile on revenue growth highlights the sensitivity of the 2009–10 revenue projections to the economic recovery.

Program expenses were up $16.3 billion, or 16.5 per cent, mainly reflecting higher EI benefit payments, higher transfers to other levels of government and support for the automotive industry. Public debt charges were down $1.4 billion on a year-over-year basis, reflecting lower interest rates.

2009-10 Projected Nominal GDP Growth

September 2009

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There was a budgetary deficit of $5.0 billion in September 2009, compared to a $0.6-billion deficit in September 2008.

Revenues decreased by $3.6 billion, or 19.4 per cent, to $15.2 billion in September 2009.

  • Personal income tax revenues decreased by $1.5 billion, or 16.2 per cent, reflecting lower employment, personal income tax reductions announced in Canada's Economic Action Plan and weaker quarterly instalment payments.
  • Corporate income tax revenues were down $1.2 billion, or 58.9 per cent, reflecting higher corporate refunds and lower receipts.
  • Non-resident income tax revenues were down $0.1 billion, or 31.8 per cent.
  • Excise taxes and duties were down $0.3 billion, or 8.4 per cent, driven by lower GST revenues. GST revenues were down $0.3 billion, or 10.8 per cent. Energy taxes were up $7 million, customs import duties were down $29 million, and other excise taxes and duties decreased by $18 million.
  • EI premium revenues were up $17 million. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009 and 2010.
  • Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, proceeds from the sale of goods and services, returns on investments, foreign exchange net revenues and miscellaneous revenues, were down $0.5 billion, or 22.0 per cent, due in large part to a decline in receipts under the Atlantic Offshore Revenue Accounts, reflecting lower oil prices. This revenue is transferred to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords, such that there is no net impact on the budgetary balance.

Program expenses in September 2009 were $17.9 billion, up $1.1 billion, or 6.3 per cent, from September 2008, largely due to higher EI benefit payments and higher transfers to other levels of government.

In September 2009, transfer payments were up $0.9 billion, or 8.4 per cent, from September 2008.

  • Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.6 billion, or 11.7 per cent. Elderly benefits increased by $0.1 billion, or 5.2 per cent. EI benefit payments increased by $0.4 billion, or 31.3 per cent, reflecting significantly higher regular benefits due to rising unemployment, as well as benefit enhancement measures announced as part of Canada's Economic Action Plan. Children's benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, increased by $51 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 up $0.3 billion, or 7.6 per cent. An adjustment has been made in September 2009 to reclassify certain transfer payments within major transfers to other levels of government to reflect the presentation that will be used in the 2009–10 Public Accounts. This reclassification has no impact on the total amount of major transfers to other levels of government recorded during the month.
  • Other transfer payments increased by $0.1 billion, or 2.8 per cent, reflecting increased transfers for infrastructure, largely offset by a decrease in agricultural assistance and a decline in transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

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 increased by $0.1 billion, or 2.4 per cent, over last year.

Public debt charges decreased by $0.3 billion compared to September 2008 due to lower average effective interest rates on the stock of interest-bearing debt.

Revenues and expenses (April to September 2009)

April to September 2009

Through the first half of the 2009–10 fiscal year, there was a budgetary deficit of $28.6 billion, compared to a surplus of $0.5 billion reported during the same period of 2008–09. Over $11 billion of the $28.6-billion deficit was attributable to actions taken under Canada's Economic Action Plan, including tax reductions, enhanced EI benefits and support for the automotive industry.

Revenues declined by $14.2 billion, or 12.3 per cent, to $101.5 billion.

  • Personal income tax revenues were down $4.2 billion, or 7.5 per cent, reflecting lower employment and the impact of tax relief measures. These tax reductions included increases in the basic personal amount and personal income tax bracket thresholds, as well as the Home Renovation Tax Credit. Personal income tax revenues are expected to remain weak through the remainder of 2009 and then begin to rise year-over-year in the first quarter of 2010 reflecting projected wage growth and the expiration of the Home Renovation Tax Credit at the end of January 2010.
  • Corporate income tax revenues were down $6.3 billion, or 39.5 per cent, reflecting an increase of roughly 50 per cent in refunds of taxes paid in previous years and a decline of about 12 per cent in receipts.
  • Non-resident income tax revenues were down $0.3 billion, or 12.7 per cent.
  • Excise taxes and duties were down $2.8 billion, or 13.4 per cent, primarily due to a $2.5-billion, or 17.9-per-cent, decline in GST revenues. GST revenues are projected to strengthen over the course of the fiscal year, reflecting the unwinding of timing impacts that dampened GST revenues early in the fiscal year and the projected recovery over the remainder of the fiscal year in consumer spending on items that are subject to the GST. Energy taxes were down $31 million, customs import duties were down $0.2 billion, and other excise taxes and duties decreased by $0.1 billion.
  • EI premium revenues were up 0.2 per cent. The premium rate was kept stable at $1.73 per $100 of insurable earnings for 2009 and 2010.
  • Other revenues were down $0.6 billion, or 5.5 per cent.

Program expenses for April to September 2009 were $115.1 billion, up $16.3 billion, or 16.5 per cent, from the same period last year, primarily reflecting higher EI benefit payments, higher transfers to other levels of government and support for the automotive industry.

Transfer payments for April to September 2009 were up $15.4 billion, or 23.8 per cent, from the same period last year.

  • Major transfers to persons were up $4.6 billion, or 15.6 per cent. Elderly benefits increased by $0.9 billion, or 5.5 per cent, in line with growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $3.5 billion, or 50.1 per cent, reflecting higher unemployment and benefit enhancements introduced as part of Canada's Economic Action Plan. Children's benefits were up $0.1 billion.
  • Major transfers to other levels of government were up $2.2 billion, or 9.4 per cent, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization, as well as the previously announced doubling of the gas tax transfer to provinces and municipalities, as of April 1, 2009.
  • Other transfer payments were up $8.7 billion, mainly reflecting support for the automotive industry and increased infrastructure funding. This increase was partially offset by a decrease in transfers to Newfoundland and Labrador and Nova Scotia under the Atlantic Offshore Accords.

Other program expenses increased by $0.9 billion, or 2.6 per cent, from last year's level, due mainly to an increase in the operating expenses of National Defence.

Public debt charges decreased by $1.4 billion, or 8.5 per cent, as the increase in the stock of interest-bearing debt was more than offset by lower average effective interest rates on that stock.

Financial requirement of $55.7 billion for April to September 2009

The budgetary balance is presented on an 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 $28.6 billion and a requirement of $27.0 billion from non-budgetary transactions, there was a financial requirement of $55.7 billion in the April to September period of 2009–10, compared to a financial requirement of $15.9 billion in the same period of 2008–09. This year-over-year difference is due mainly to the deterioration in the budgetary balance.

Net financing activities up $30.7 billion

The Government financed this financial requirement of $55.7 billion by increasing market debt by $30.7 billion and reducing cash balances by $25.0 billion. The increase in market debt was achieved primarily through the issuance of marketable bonds. 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. Cash balances at the end of September 2009 stood at $20.1 billion, $12.3 billion above their level at the end of September 2008.

Table 1
Summary Statement of Transactions
  September April to September
 

  2008 2009 2008–09 2009–10
  ($millions)
Budgetary transactions        
  Revenues 18,826 15,181 115,795 101,547
  Expenses        
    Program expenses -16,830 -17,892 -98,809 -115,129
    Public debt charges -2,546 -2,248 -16,451 -15,060
 

  Budgetary balance (deficit/surplus) -550 -4,959 535 -28,642
Non-budgetary transactions 4,229 -5,204 -16,476 -27,034
Financial source/requirement 3,679 -10,163 -15,941 -55,676
Net change in financing activities -5,136 5,697 12,464 30,712
Net change in cash balances -1,457 -4,466 -3,477 -24,964
Cash balance at end of period     7,765 20,068
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

 

Table 2
Revenues
  September   April to September  
 
 
 
  2008 2009 Change 2008–09 2009–10 Change


  ($ millions) (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal income tax 9,567 8,019 -16.2 56,357 52,130 -7.5
    Corporate income tax 2,062 848 -58.9 15,831 9,581 -39.5
    Non-resident income tax 384 262 -31.8 2,669 2,330 -12.7
 

    Total income tax 12,013 9,129 -24.0 74,857 64,041 -14.4
  Excise taxes and duties            
    Goods and services tax 2,524 2,252 -10.8 13,771 11,311 -17.9
    Energy taxes 458 465 1.5 2,533 2,502 -1.2
    Customs import duties 348 319 -8.3 2,070 1,831 -11.5
    Other excise taxes and duties 366 348 -4.9 2,578 2,495 -3.2
 

    Total excise taxes and duties 3,696 3,384 -8.4 20,952 18,139 -13.4
 

  Total tax revenues 15,709 12,513 -20.3 95,809 82,180 -14.2
Employment Insurance premiums 995 1,012 1.7 8,393 8,408 0.2
Other revenues 2,122 1,656 -22.0 11,593 10,959 -5.5
Total revenues 18,826 15,181 -19.4 115,795 101,547 -12.3
Note: Totals may not add due to rounding.

 

Table 3
Expenses
  September   April to September  
 
 
 
  2008 2009 Change 2008–09 2009–10 Change


  ($ millions) (%) ($ millions) (%)
Transfer payments            
  Major transfers to persons            
    Elderly benefits 2,750 2,894 5.2 16,275 17,178 5.5
    Employment Insurance benefits 1,217 1,598 31.3 7,052 10,582 50.1
    Children's benefits 974 1,025 5.2 6,017 6,152 2.2
 

    Total 4,941 5,517 11.7 29,344 33,912 15.6
  Major transfers to other levels of government            
    Support for health and other
     social programs
           
      Canada Health Transfer 1,886 2,165 14.8 11,315 12,363 9.3
      Canada Social Transfer 880 830 -5.7 5,279 5,430 2.9
 

      Total 2,766 2,995 8.3 16,594 17,793 7.2
    Fiscal transfers 1,236 1,272 2.9 7,859 8,351 6.3
    Canada's cities and communities 0 0 n/a 481 957 99.0
    Alternative Payments for Standing Programs -254 -235 -7.5 -1,420 -1,378 -3.0
 

    Total 3,748 4,032 7.6 23,514 25,723 9.4
  Other transfer payments            
    Agriculture and Agri-Food 276 65 -76.4 688 628 -8.7
    Foreign Affairs and International Trade 198 170 -14.1 1,334 1,390 4.2
    Health 242 241 -0.4 1,123 1,290 14.9
    Human Resources and Social Development 161 244 51.6 1,085 1,484 36.8
    Indian Affairs and Northern Development 450 403 -10.4 2,456 2,553 3.9
    Industry 143 171 19.6 951 1,060 11.5
    Other 784 1,022 30.4 4,438 12,333 177.9
 

    Total 2,254 2,316 2.8 12,075 20,738 71.7
 

  Total transfer payments 10,943 11,865 8.4 64,933 80,373 23.8
Other program expenses            
  Crown corporations 611 743 21.6 3,897 4,109 5.4
  Defence 1,643 1,719 4.6 8,922 9,392 5.3
  All other departments and agencies 3,633 3,565 -1.9 21,057 21,255 0.9
 

  Total other program expenses 5,887 6,027 2.4 33,876 34,756 2.6
Total program expenses 16,830 17,892 6.3 98,809 115,129 16.5
Public debt charges 2,546 2,248 -11.7 16,451 15,060 -8.5
Total expenses 19,376 20,140 3.9 115,260 130,189 13.0
Note: Totals may not add due to rounding.

 

Table 4
The Budgetary Balance and Financial Source/Requirement
  September April to September
 

  2008 2009 2008–09 2009–10
  ($ millions)
Budgetary balance (deficit/surplus) -550 -4,959 535 -28,642
Non-budgetary transactions        
  Capital investment activities -511 -477 -1,443 -1,243
  Other investing activities -1,459 -3,344 -13,993 -16,752
  Pension and other accounts 396 278 2,465 3,640
  Other activities        
    Accounts payable, receivables,
      accruals and allowances
5,937 790 -3,249 -15,740
    Foreign exchange activities -408 -2,763 -1,937 1,409
    Amortization of tangible capital assets 274 312 1,681 1,652
 

    Total other activities 5,803 -1,661 -3,505 -12,679
  Total non-budgetary transactions 4,229 -5,204 -16,476 -27,034
Financial source/requirement 3,679 -10,163 -15,941 -55,676
Note: Totals may not add due to rounding.

 

Table 5
Financial Source/Requirement and Net Financing Activities
  September April to September
 

  2008 2009 2008–09 2009–10
  ($ millions)
Financial source/requirement 3,679 -10,163 -15,941 -55,676
Net increase (+)/decrease (-) in financing activities        
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds -7,422 1,793 -2,143 37,071
      Treasury bills 2,700 2,300 16,300 700
      Canada Savings Bonds 11 -17 -115 -60
      Other 0 0 -492 -67
 

      Total -4,711 4,076 13,550 37,644
    Foreign currency borrowings 149 2,220 -1,023 -2,112
 

    Total -4,562 6,296 12,527 35,532
    Cross-currency swap revaluation -602 -492 -354 -4,471
    Unamortized discounts on debt issues 38 -96 374 -263
    Obligations related to capital leases -10 -11 -83 -86
  Net change in financing activities -5,136 5,697 12,464 30,712
Change in cash balance -1,457 -4,466 -3,477 -24,964
Note: Totals may not add due to rounding.

 

Table 6
Condensed Statement of Assets and Liabilities
  March 31, 2009 September 30, 2009 Change
  ($ millions)
Liabilities      
  Accounts payable and accrued liabilities 113,999 92,442 -21,557
  Interest-bearing debt      
    Unmatured debt      
      Payable in Canadian currency      
        Marketable bonds 295,186 332,257 37,071
        Treasury bills 192,275 192,975 700
        Retail debt 12,532 12,472 -60
        Other 523 456 -67
 
        Subtotal 500,516 538,160 37,644
      Payable in foreign currencies 10,381 8,269 -2,112
      Cross-currency swap revaluation account 3,690 -781 -4,471
      Unamortized discounts and premiums
       on market debt
-4,751 -5,014 -263
      Obligations related to capital leases 4,184 4,098 -86
 
      Total unmatured debt 514,020 544,732 30,712
    Pension and other liabilities      
      Public sector pensions 139,909 141,805 1,896
      Other employee and veteran future benefits 50,311 52,050 1,739
      Other liabilities 5,923 5,928 5
 
      Total pension and other liabilities 196,143 199,783 3,640
    Total interest-bearing debt 710,163 744,515 34,352
  Total liabilities 824,162 836,957 12,795
Financial assets      
  Cash and accounts receivable 122,147 91,366 -30,781
  Foreign exchange accounts 51,709 50,300 -1,409
  Loans, investments, and advances (net of allowances) 125,093 141,845 16,752
 
  Total financial assets 298,949 283,511 -15,438
 
Net debt 525,213 553,446 28,233
Non-financial assets 61,503 61,094 -409
Federal debt (accumulated deficit) 463,710 492,352 28,642
Note: Totals may not add due to rounding.

For inquiries about this publication, contact Doug Nevison at 613-995-6391.
November 2009