The Fiscal Monitor
A publication of the Department of Finance

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April and May 2014: budgetary deficit of $1.1 billion

For the first two months of the 2014–15 fiscal year (April and May), there was a budgetary deficit of $1.1 billion, compared to a deficit of $2.7 billion reported in the same period last year. By month, there was a deficit of $1.4 billion in April and a surplus of $0.3 billion in May. 

For the two months combined, revenues increased by $1.6 billion, or 3.8 per cent, largely reflecting increases in income tax revenues and excise taxes and duties. Program expenses were up $0.2 billion, or 0.6 per cent, as increases in major transfers to persons and other levels of government were largely offset by a decrease in direct program expenses.  Public debt charges decreased by $0.2 billion, or 3.1 per cent, reflecting a lower stock of market debt as a result of assets maturing under the Insured Mortgage Purchase Program in 2013–14, as well as a lower average effective interest rate on bonds.

April and May 2014 budgetary results

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There was a budgetary deficit of $1.1 billion in the April to May 2014 period, compared to a $2.7-billion deficit for the same period in the previous year.

Revenues increased by $1.6 billion, or 3.8 per cent, to $43.5 billion.

  • Personal income tax revenues were up $0.8 billion, or 3.9 per cent.
  • Corporate income tax revenues were up $0.6 billion, or 12.1 per cent.
  • Non-resident income tax revenues were down $0.1 billion, or 13.3 per cent.
  • Excise taxes and duties were up $0.4 billion, or 5.5 per cent.  Within this component, Goods and Services Tax (GST) revenues were up $0.2 billion, or 4.1 per cent.  Energy taxes were down $28 million, and customs import duties and other excise taxes and duties were each up $0.1 billion. 
  • Employment Insurance (EI) premium revenues were up $0.2 billion, or 4.1 per cent, reflecting the growth in earnings and the EI premium rate freeze at $1.88 per $100 of insurable earnings for 2014.  
  • Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were down $0.2 billion, or 5.3 per cent. 

Total program expenses in the April to May 2014 period were $39.5 billion, up $0.2 billion, or 0.6 per cent, from the prior year. This increase mainly reflects higher transfer payments to persons and other levels of government, offset in part by a decrease in direct program expenses.

  • Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, increased by $0.3 billion, or 2.7 per cent. Elderly benefits increased by $0.3 billion, or 3.9 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.1  billion, or 4.4 per cent.  Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, decreased by $0.1 billion, or 3.3 per cent.    
  • Major transfers to other levels of government consist of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada’s cities and communities, and the Quebec Abatement.  Major transfers to other levels of government increased by $0.4 billion in the April to May period, or 3.8 per cent, from the prior year, primarily reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer and the Equalization and Territorial Formula Financing transfers.
  • Direct program expenses include transfer payments to individuals and other organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of operating expenses of departments and agencies, and expenses of Crown corporations. Direct program expenses in the April to May period were down $0.5 billion, or 2.9 per cent, from the prior year.
    • Transfer payments decreased by $0.2 billion, or 4.5 per cent, largely reflecting a decrease in expenses associated with the revaluation of the Government’s liability to Ontario for the province’s one-third participation in the value of the Government’s equity holdings in General Motors.
    • Other direct program expenses decreased by $0.3 billion, or 2.2 per cent.

Public debt charges decreased by $0.2 billion, or 3.1 per cent, reflecting a lower stock of market debt as a result of assets maturing under the Insured Mortgage Purchase Program in 2013–14, as well as a lower average effective interest rate on domestic marketable bonds.

Revenues and expenses (April 2013 to May 2014)
Revenues and expenses (April and May 2014) - For details, refer to preceding paragraphs.
Note: Totals may not add due to rounding.

Financial requirement of $3.6 billion for April and May 2014

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses when they are earned 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 $1.1 billion and a requirement of $2.4 billion from non-budgetary transactions, there was a financial requirement of $3.6 billion for April to May 2014 period, compared to a financial requirement of $11.8 billion from the same period the previous year. 

Net financing activities up $17.4 billion

The government financed this financial requirement of $3.6 billion and increased cash balances by $13.9 billion by increasing unmatured debt by $17.4 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds and treasury bills. 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 May 2014 stood at $39.9 billion, down $0.4 billion from their level at the end of May 2013.  

 
Table 1
Summary statement of transactions
($ millions)
April May April - May



2013 2014 2013 2014 2013–14 2014–15
Budgetary transactions            
  Revenues 22,507 21,586 19,383 21,916 41,890 43,502
  Expenses
    Program expenses -19,936 -20,364 -19,298 -19,086 -39,234 -39,450
    Public debt charges -2,854 -2,636 -2,512 -2,563 -5,366 -5,199
 


  Budgetary balance (deficit/surplus) -283 -1,414 -2,427 267 -2,710 -1,147
Non-budgetary transactions -5,764 -434 -3,318 -2,004 -9,082 -2,438
 


Financial source/requirement -6,047 -1,848 -5,745 -1,737 -11,792 -3,585
Net change in financing activities 10,732 11,510 17,083 5,926 27,815 17,436
 


Net change in cash balances 4,685 9,662 11,338 4,189 16,023 13,851
Cash balance at end of period 40,337 39,923
Notes: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.
 
Table 2
Revenues
April May April - May  



 
2013 2014 2013 2014 2013–14 2014–15 Change
($ millions) (%)
Tax revenues              
  Income taxes              
    Personal income tax 10,119 10,462 9,578 10,013 19,697 20,475 3.9
    Corporate income tax 3,635 2,826 1,462 2,886 5,097 5,712 12.1
    Non-resident income tax 442 451 565 422 1,007 873 -13.3
 


    Total income tax 14,196 13,739 11,605 13,321 25,801 27,060 4.9
  Excise taxes and duties
    Goods and Services Tax 2,568 2,305 2,320 2,781 4,888 5,086 4.1
    Energy taxes 383 416 504 443 887 859 -3.2
    Customs import duties 339 364 283 353 622 717 15.3
    Other excise taxes and duties 463 419 391 571 854 990 15.9
 


    Total excise taxes and duties 3,753 3,504 3,498 4,148 7,251 7,652 5.5
 


  Total tax revenues 17,949 17,243 15,103 17,469 33,052 34,712 5.0
Employment Insurance premiums 2,286 2,377 2,165 2,257 4,451 4,634 4.1
Other revenues1 2,272 1,966 2,115 2,190 4,387 4,156 -5.3
 


Total revenues 22,507 21,586 19,383 21,916 41,890 43,502 3.8
Note: Totals may not add due to rounding.
(1) Comparative figures have been restated to reflect the reclassification of interest owed to taxpayers from other revenues to other direct program expenses of departments and agencies.
 
Table 3
Expenses
April May April - May



 
2013 2014 2013 2014 2013–14 2014–15 Change
($ millions) (%)
Major transfers to persons              
  Elderly benefits 3,410 3,553 3,451 3,573 6,861 7,126 3.9
  Employment Insurance benefits 1,804 1,893 1,227 1,271 3,031 3,164 4.4
  Children’s benefits 1,136 1,100 1,097 1,059 2,233 2,159 -3.3
 


  Total 6,350 6,546 5,775 5,903 12,125 12,449 2.7
Major transfers to other levels of government
  Support for health and other social programs
    Canada Health Transfer 2,544 2,676 2,545 2,676 5,089 5,352 5.2
    Canada Social Transfer 1,018 1,048 1,018 1,049 2,036 2,097 3.0
 


    Total 3,562 3,724 3,563 3,725 7,125 7,449 4.5
  Fiscal arrangements and other transfers 1,869 1,945 1,868 1,944 3,737 3,889 4.1
  Canada’s cities and communities 0 0 58 0 58 0 -100.0
  Quebec Abatement -359 -376 -359 -376 -718 -752 4.7
 


  Total 5,072 5,293 5,130 5,293 10,202 10,586 3.8
Direct program expenses
  Transfer payments
    Aboriginal Affairs and Northern Development 860 960 362 332 1,222 1,292 5.7
    Agriculture and Agri-Food 51 16 53 26 104 42 -59.6
    Employment and Social Development 305 340 332 334 637 674 5.8
    Foreign Affairs, Trade and Development 197 61 144 305 341 366 7.3
    Health 260 414 265 260 525 674 28.4
    Industry 283 220 70 132 353 352 -0.3
    Other 949 785 968 682 1,917 1,467 -23.5
 


    Total 2,905 2,796 2,194 2,071 5,099 4,867 -4.5
 


  Other direct program expenses              
    Crown corporations 718 702 567 485 1,285 1,187 -7.6
    National Defence 1,451 1,506 1,712 1,567 3,163 3,073 -2.8
    All other departments and agencies 3,440 3,521 3,920 3,767 7,360 7,288 -1.0
 


    Total other direct program expenses1 5,609 5,729 6,199 5,819 11,808 11,548 -2.2
 


  Total direct program expenses 8,514 8,525 8,393 7,890 16,907 16,415 -2.9
 


Total program expenses 19,936 20,364 19,298 19,086 39,234 39,450 0.6
Public debt charges 2,854 2,636 2,512 2,563 5,366 5,199 -3.1
 


Total expenses 22,790 23,000 21,810 21,649 44,600 44,649 0.1
Note: Totals may not add due to rounding.
(1) Comparative figures have been restated to reflect the reclassification of interest owed to taxpayers from other revenues to other direct program expenses of departments and agencies.
 
Table 4
The budgetary balance and financial source/requirement
($ millions)
April May April - May



2013 2014 2013 2014 2013–14 2014–15
Budgetary balance (deficit/surplus) -283 -1,414 -2,427 267 -2,710 -1,147
Non-budgetary transactions
  Capital investment activities 22 -83 -5 -120 17 -203
  Other investing activities 104 1,443 -417 1,079 -313 2,522
  Pension and other accounts -96 169 221 189 125 358
  Other activities    
    Accounts payable, receivables, accruals and allowances -5,462 -2,231 -1,903 -3,847 -7,365 -6,078
    Foreign exchange activities -666 -139 -1,600 357 -2,266 218
    Amortization of tangible capital assets 334 407 386 338 720 745
 


    Total other activities -5,794 -1,963 -3,117 -3,152 -8,911 -5,115
 


  Total non-budgetary transactions -5,764 -434 -3,318 -2,004 -9,082 -2,438
 


Financial source/requirement -6,047 -1,848 -5,745 -1,737 -11,792 -3,585
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
($ millions)
April May April - May



2013 2014 2013 2014 2013–14 2014–15
Financial source/requirement -6,047 -1,848 -5,745 -1,737 -11,792 -3,585
Net increase (+)/decrease (-) in financing activities            
  Unmatured debt transactions            
    Canadian currency borrowings            
      Marketable bonds 8,496 5,096 7,606 3,794 16,102 8,890
      Treasury bills 1,900 6,900 8,100 3,000 10,000 9,900
      Retail debt -108 -60 0 -6 -108 -66
      Other 0 0 0 0 0 0
 


      Total 10,288 11,936 15,706 6,788 25,994 18,724
    Foreign currency borrowings 496 -93 -17 66 479 -27
 


    Total 10,784 11,843 15,689 6,854 26,473 18,697
    Cross-currency swap revaluation 5 -350 1,152 -866 1,157 -1,216
    Unamortized discounts and premiums on market debt -22 51 255 -47 233 4
    Obligations related to capital leases and other unmatured debt -35 -34 -13 -15 -48 -49
 


  Net change in financing activities 10,732 11,510 17,083 5,926 27,815 17,436
Change in cash balance 4,685 9,662 11,338 4,189 16,023 13,851
Note: Totals may not add due to rounding.

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

For inquiries about this publication, contact Nicholas Leswick at 613-995-6391.

July 2014