The Fiscal Monitor
A publication of the Department of Finance

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April and May 2016:  budgetary surplus of $0.1 billion

For the first two months of the 2016-17 fiscal year (April and May), there was a budgetary surplus of $0.1 billion, compared to a surplus of $3.9 billion reported in the same period last year. By month, there was a surplus of $0.7 billion in April and a deficit of $0.6 billion in May.

For the two months combined, revenues decreased by $1.0 billion, or 2.1 per cent, as an increase in income tax revenues was more than offset by decreases in excise taxes and duties and other revenues.  Program expenses were up $3.5 billion, or 8.8 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by $0.7 billion, or 13.5 per cent, largely reflecting lower consumer price index adjustments on Real Return Bonds and lower average effective interest rates on the stock of interest-bearing debt.

April and May 2016 budgetary results

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There was a budgetary surplus of $0.1 billion in the April to May 2016 period, compared to a $3.9-billion surplus for the same period in the previous year.

Revenues decreased by $1.0 billion, or 2.1 per cent, to $48.0 billion.

  • Personal income tax revenues were up $0.4 billion, or 1.6 per cent.
  • Corporate income tax revenues were up $0.5 billion, or 7.6 per cent.
  • Non-resident income tax revenues were up $0.2 billion, or 19.0 per cent.
  • Excise taxes and duties were down $0.2 billion, or 3.0 per cent.  Within this component, Goods and Services Tax (GST) revenues were down $0.2 billion, or 4.0 per cent.  Energy taxes were down $0.1 billion, customs import duties were up $0.1 billion and other excise taxes and duties were up $16 million. 
  • Employment Insurance (EI) premium revenues were up $0.1 billion, or 1.7 per cent, reflecting growth in earnings.  
  • 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 $1.8 billion, or 27.9 per cent. This decline is the result of a significant gain realized on the sale of the Government’s remaining holdings of General Motors common shares in April 2015, which did not recur in 2016. 

Program expenses increased by $3.5 billion, or 8.8 per cent, to $43.5 billion.       

  • Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, increased by $1.3 billion, or 9.7 per cent. Elderly benefits increased by $0.3 billion, or 4.0 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 3.4 per cent.  Children’s benefits were up $0.9 billion, or 39.2 per cent, largely reflecting increased benefits related to the enhancement and expansion of the Universal Child Care Benefit.
  • 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 $0.5 billion, or 4.4 per cent, primarily reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
  • 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 were up $1.7 billion, or 11.0 per cent.
    • Transfer payments increased by $0.7 billion, or 15.0 per cent, largely reflecting year-over-year differences in the timing of transfers across several departments.
    • Other direct program expenses increased by $1.0 billion, or 9.3 per cent, due in large part to an increase in pension and benefit costs based on the Government’s latest actuarial valuations.

Public debt charges decreased by $0.7 billion, or 13.5 per cent, largely reflecting lower consumer price index adjustments on Real Return Bonds and lower average effective interest rates on the stock of interest-bearing debt.

 
Revenues and expenses (April 2016 to May 2016)
Revenues and expenses (April 2016 to May 2016) - For details, refer to preceding paragraphs.
Note: Totals may not add due to rounding.

Financial requirement of $8.5 billion for April and May 2016

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 surplus of $0.1 billion and a requirement of $8.6 billion from non-budgetary transactions, there was a financial requirement of $8.5 billion for the April to May 2016 period, compared to a financial requirement of $1.4 billion from the same period the previous year. 

Net financing activities up $23.3 billion

The government financed this financial requirement of $8.5 billion and increased cash balances by $14.8 billion by increasing unmatured debt by $23.3 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 2016 stood at $52.6 billion, up $12.5 billion from their level at the end of May 2015.  

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



2015 2016 2015 2016 2015–16 2016–17
Budgetary transactions            
  Revenues 25,370 24,724 23,680 23,318 49,050 48,042
  Expenses
    Program expenses -20,298 -21,959 -19,729 -21,575 -40,027 -43,534
    Public debt charges -2,528 -2,059 -2,550 -2,335 -5,078 -4,394
 


  Budgetary balance (deficit/surplus) 2,544 706 1,401 -592 3,945 114
Non-budgetary transactions -585 -5,976 -4,797 -2,649 -5,382 -8,625
 


Financial source/requirement 1,959 -5,270 -3,396 -3,241 -1,437 -8,511
Net change in financing activities 6,510 11,545 7,028 11,721 13,538 23,266
 


Net change in cash balances 8,469 6,275 3,632 8,480 12,101 14,755
Cash balance at end of period 40,052 52,599
Notes: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.
 
Table 2
Revenues
April May April – May  



 
2015 2016 2015 2016 2015–16 2016–17 Change
($ millions) (%)
Tax revenues              
  Income taxes              
    Personal income tax 11,110 12,730 11,244 9,990 22,354 22,720 1.6
    Corporate income tax 3,417 2,882 2,811 3,822 6,228 6,704 7.6
    Non-resident income tax 336 434 471 526 807 960 19.0
 


    Total income tax 14,863 16,046 14,526 14,338 29,389 30,384 3.4
  Excise taxes and duties
    Goods and Services Tax 2,413 2,598 3,249 2,838 5,662 5,436 -4.0
    Energy taxes 516 423 425 427 941 850 -9.7
    Customs import duties 390 412 373 403 763 815 6.8
    Other excise taxes and duties 408 402 511 533 919 935 1.7
 


    Total excise taxes and duties 3,727 3,835 4,558 4,201 8,285 8,036 -3.0
 


  Total tax revenues 18,590 19,881 19,084 18,539 37,674 38,420 2.0
Employment Insurance premiums 2,479 2,505 2,325 2,379 4,804 4,884 1.7
Other revenues 4,301 2,338 2,271 2,400 6,572 4,738 -27.9
 


Total revenues 25,370 24,724 23,680 23,318 49,050 48,042 -2.1
Note: Totals may not add due to rounding.
 
Table 3
Expenses
April May April – May



 
2015 2016 2015 2016 2015–16 2016–17 Change
($ millions) (%)
Major transfers to persons              
  Elderly benefits 3,723 3,842 3,755 3,938 7,478 7,780 4.0
  Employment Insurance benefits 1,726 1,734 1,760 1,870 3,486 3,604 3.4
  Children’s benefits 1,075 1,507 1,115 1,542 2,190 3,049 39.2
 


  Total 6,524 7,083 6,630 7,350 13,154 14,433 9.7
Major transfers to other levels of government
  Support for health and other social programs
    Canada Health Transfer 2,835 3,005 2,836 3,006 5,671 6,011 6.0
    Canada Social Transfer 1,080 1,113 1,080 1,112 2,160 2,225 3.0
 


    Total 3,915 4,118 3,916 4,118 7,831 8,236 5.2
  Fiscal arrangements and other transfers 2,016 2,057 2,015 2,056 4,031 4,113 2.0
  Canada’s cities and communities 0 0 0 0 0 0 n/a
  Quebec Abatement -385 -382 -384 -381 -769 -763 -0.8
 


  Total 5,546 5,793 5,547 5,793 11,093 11,586 4.4
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 25 37 37 44 62 81 30.6
    Employment and Social Development Canada 328 346 313 331 641 677 5.6
    Global Affairs Canada 213 148 146 325 359 473 31.8
    Health Canada 437 469 223 258 660 727 10.2
    Indigenous and Northern Affairs Canada 958 979 304 426 1,262 1,405 11.3
    Innovation, Science and Economic Development Canada 221 240 71 128 292 368 26.0
    Other 745 1,069 713 643 1,458 1,712 17.4
 


    Total 2,927 3,288 1,807 2,155 4,734 5,443 15.0
 


  Other direct program expenses              
    Crown corporations 745 854 624 625 1,369 1,479 8.0
    National Defence 1,355 1,506 1,633 1,853 2,988 3,359 12.4
    All other departments and agencies 3,201 3,435 3,488 3,799 6,689 7,234 8.1
 


    Total other direct program expenses 5,301 5,795 5,745 6,277 11,046 12,072 9.3
 


  Total direct program expenses 8,228 9,083 7,552 8,432 15,780 17,515 11.0
 


Total program expenses 20,298 21,959 19,729 21,575 40,027 43,534 8.8
Public debt charges 2,528 2,059 2,550 2,335 5,078 4,394 -13.5
 


Total expenses 22,826 24,018 22,279 23,910 45,105 47,928 6.3
Note: Totals may not add due to rounding.
 
Table 4
The budgetary balance and financial source/requirement
($ millions)
April May April – May



2015 2016 2015 2016 2015–16 2016–17
Budgetary balance (deficit/surplus) 2,544 706 1,401 -592 3,945 114
Non-budgetary transactions
  Capital investment activities -107 -107 -55 -172 -162 -279
  Other investing activities 506 -684 -628 -689 -122 -1,373
  Pension and other accounts 295 115 110 452 405 567
  Other activities    
    Accounts payable, receivables, accruals and allowances -5,495 -6,331 -2,582 2,123 -8,077 -4,208
    Foreign exchange activities 3,828 651 -2,022 -4,807 1,806 -4,156
    Amortization of tangible capital assets 388 380 380 444 768 824
 


    Total other activities -1,279 -5,300 -4,224 -2,240 -5,503 -7,540
 


  Total non-budgetary transactions -585 -5,976 -4,797 -2,649 -5,382 -8,625
 


Financial source/requirement 1,959 -5,270 -3,396 -3,241 -1,437 -8,511
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
($ millions)
April May April – May



2015 2016 2015 2016 2015–16 2016–17
Financial source/requirement 1,959 -5,270 -3,396 -3,241 -1,437 -8,511
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds 8,118 8,878 -1,417 3,225 6,701 12,103
      Treasury bills 1,400 4,800 6,600 4,400 8,000 9,200
      Retail debt -40 12 3 132 -37 144
 


      Total 9,478 13,690 5,186 7,757 14,664 21,447
    Foreign currency borrowings -802 90 269 1,158 -533 1,248
 


    Total 8,676 13,780 5,455 8,915 14,131 22,695
    Cross-currency swap revaluation -2,287 -2,175 1,530 2,579 -757 404
    Unamortized discounts and premiums on market debt 158 -26 59 244 217 218
    Obligations related to capital leases and other unmatured debt -37 -34 -16 -17 -53 -51
 


  Net change in financing activities 6,510 11,545 7,028 11,721 13,538 23,266
Change in cash balance 8,469 6,275 3,632 8,480 12,101 14,755
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 Bradley Recker at 613-369-5667.

July 2016