The Fiscal Monitor
A publication of the Department of Finance

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June 2016: budgetary deficit of $1.1 billion

There was a budgetary deficit of $1.1 billion in June 2016, compared to a surplus of $1.1 billion in June 2015. Revenues decreased by $0.5 billion, or 2.2 per cent, reflecting lower revenues from corporate income tax, non-resident income tax, and excise taxes and duties. Program expenses increased by $1.6 billion, or 7.5 per cent, reflecting increases in major transfers to other levels of government and direct program expenses, offset in part by a decrease in major transfers to persons. Public debt charges increased by $0.1 billion, or 3.1 per cent, due mainly to higher Consumer Price Index adjustments on Real Return Bonds that were partially offset by a lower average effective interest rate on the stock of interest-bearing debt.

April to June 2016: budgetary deficit of $1.0 billion

For the April to June 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $1.0 billion, compared to a surplus of $5.0 billion reported in the same period of 2015–16. Revenues were down $1.5 billion, or 2.1 per cent, largely reflecting a decrease in other revenues. Program expenses were up $5.1 billion, or 8.3 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $0.6 billion, or 8.9 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

Quarterly update of the fiscal outlook

The financial results for the first three months of the fiscal year provide limited information with respect to the outlook for the year as a whole. This is because the timing of revenues and expenses can vary from year to year and because the results do not yet reflect several significant government initiatives, such as the introduction of the Canada Child Benefit. That being said, financial results over the April to June 2016 period show a budgetary deficit of $1.0 billion, which represents a $6.0-billion deterioration relative to the same period the previous year, indicating that results are broadly consistent with the fiscal projection for 2016–17 presented in the budget.

An update of the economic and fiscal outlook will be provided in the fall in the Update of Economic and Fiscal Projections.

June 2016

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There was a budgetary deficit of $1.1 billion in June 2016, compared to a surplus of $1.1 billion in June 2015.

Revenues decreased by $0.5 billion, or 2.2 per cent, to $23.7 billion.

  • Personal income tax revenues were up $26 million, or 0.2 per cent.
  • Corporate income tax revenues were down $0.3 billion, or 7.2 per cent.
  • Non-resident income tax revenues were down $0.2 billion, or 38.3 per cent.
  • Excise taxes and duties were down $0.2 billion, or 3.9 per cent, driven mainly by a $0.1-billion, or 24.4-per-cent, decrease in energy tax revenues. Goods and Services Tax (GST) revenues were up $34 million, while customs import duties were down $5 million and other excise taxes and duties were down $0.1 billion.
  • Employment Insurance (EI) premium revenues were up $29 million, or 1.3 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 up $0.1 billion, or 5.1 per cent. 

Program expenses in June 2016 were $22.9 billion, up $1.6 billion, or 7.5 per cent, from June 2015. 

  • Major transfers to persons, consisting of elderly, EI and children’s benefits, decreased by $0.5 billion, or 6.3 per cent. Elderly benefits increased by $0.2 billion, or 4.2 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 4.8 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit (UCCB), decreased by $0.7 billion, or 30.7 per cent. This decline reflects the accrual of benefits related to the expansion and enhancement of the UCCB for the April to June 2015 period recorded in June 2015, which did not recur in June 2016.  
  • 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 $0.3 billion, or 5.3 per cent, mainly due to 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 National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $1.8 billion, or 20.4 per cent. Within direct program expenses:
    • Transfer payments increased by $1.1 billion, or 39.6 per cent, due mainly to an increase in transfers for disaster assistance.   
    • Other direct program expenses increased by $0.7 billion, or 11.8 per cent, due in large part to an increase in pension and benefit costs based on the Government’s latest actuarial valuations and an increase in operating expenses of Crown corporations.

Public debt charges increased by $0.1 billion, or 3.1 per cent, due mainly to higher Consumer Price Index adjustments on Real Return Bonds that were partially offset by a lower average effective interest rate on the stock of interest-bearing debt.

April to June 2016

For the April to June 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $1.0 billion, compared to a surplus of $5.0 billion reported during the same period of 2015–16.

Revenues decreased by $1.5 billion, or 2.1 per cent, to $71.8 billion.

  • Personal income tax revenues were up $0.4 billion, or 1.2 per cent. 
  • Corporate income tax revenues were up $0.2 billion, or 1.8 per cent.
  • Non-resident income tax revenues were down $0.1 billion, or 4.5 per cent. 
  • Excise taxes and duties were down $0.4 billion, or 3.3 per cent, largely reflecting a $0.2-billion decrease in both energy tax revenues and GST revenues. Customs import duties were up $47 million and other excise taxes and duties were down $0.1 billion.
  • EI premium revenues were up $0.1 billion, or 1.6 per cent, reflecting growth in earnings.
  • Other revenues were down $1.7 billion, or 19.4 per cent. This decline largely reflects the $2.1-billion 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.

For the April to June 2016 period, program expenses were $66.4 billion, up $5.1 billion, or 8.3 per cent, from the same period the previous year. 

  • Major transfers to persons were up $0.8 billion, or 4.0 per cent. Elderly benefits increased by $0.5 billion, or 4.1 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.2 billion, or 3.8 per cent. Children’s benefits were up $0.2 billion, or 4.0 per cent.
  • Major transfers to other levels of government were up $0.8 billion, or 4.7 per cent, mainly reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
  • Direct program expenses were up $3.5 billion, or 14.3 per cent. Within direct program expenses:
    • Transfer payments increased by $1.8 billion, or 23.9 per cent, reflecting year-over-year differences in the timing of transfers and an increase in transfers for disaster assistance.
    • Other direct program expenses increased by $1.7 billion, or 10.2 per cent, due in large part to an increase in pension and benefit costs based on the Government’s latest actuarial valuations and an increase in operating expenses of Crown corporations.

Public debt charges decreased by $0.6 billion, or 8.9 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

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

Financial requirement of $13.6 billion for April to June 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 deficit of $1.0 billion and a requirement of $12.6 billion from non-budgetary transactions, there was a financial requirement of $13.6 billion for the April to June 2016 period, compared to a financial requirement of $5.3 billion for the same period the previous year. 

Net financing activities up $14.3 billion

The Government financed this financial requirement of $13.6 billion and increased cash balances by $0.7 billion by increasing unmatured debt by $14.3 billion. The increase in unmatured debt was achieved primarily through the issuance of 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. Cash balances at the end of June 2016 stood at $38.5 billion, up $10.5 billion from their level at the end of June 2015. 

 
Table 1
Summary statement of transactions
$ millions
  June April to June
 

  2015 2016 2015–16 2016–17
Budgetary transactions        
  Revenues 24,265 23,743 73,315 71,785
  Expenses
    Program expenses -21,269 -22,862 -61,296 -66,396
    Public debt charges -1,930 -1,990 -7,008 -6,384
 

  Budgetary balance (deficit/surplus) 1,066 -1,109 5,011 -995
Non-budgetary transactions -4,881 -3,957 -10,263 -12,582
 

Financial source/requirement -3,815 -5,066 -5,252 -13,577
Net change in financing activities -8,237 -9,015 5,301 14,251
 

Net change in cash balances -12,052 -14,081 49 674
Cash balance at end of period 27,999 38,519
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  June   April to June  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 10,496 10,522 0.2 32,851 33,242 1.2
    Corporate income tax 4,070 3,775 -7.2 10,298 10,479 1.8
    Non-resident income tax 564 348 -38.3 1,370 1,308 -4.5
 

    Total income tax 15,130 14,645 -3.2 44,519 45,029 1.1
  Excise taxes and duties
    Goods and Services Tax 3,188 3,222 1.1 8,851 8,658 -2.2
    Energy taxes 434 328 -24.4 1,376 1,179 -14.3
    Customs import duties 444 439 -1.1 1,207 1,254 3.9
    Other excise taxes and duties 630 526 -16.5 1,549 1,461 -5.7
 

    Total excise taxes and duties 4,696 4,515 -3.9 12,983 12,552 -3.3
 

  Total tax revenues 19,826 19,160 -3.4 57,502 57,581 0.1
Employment Insurance premiums 2,168 2,197 1.3 6,971 7,081 1.6
Other revenues 2,271 2,386 5.1 8,842 7,123 -19.4
 

Total revenues 24,265 23,743 -2.2 73,315 71,785 -2.1
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  June   April to June  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,781 3,938 4.2 11,259 11,718 4.1
  Employment Insurance benefits 1,330 1,394 4.8 4,816 4,998 3.8
  Children's benefits 2,225 1,541 -30.7 4,414 4,591 4.0
 

  Total 7,336 6,873 -6.3 20,489 21,307 4.0
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 2,836 3,006 6.0 8,507 9,017 6.0
    Canada Social Transfer 1,080 1,112 3.0 3,240 3,337 3.0
 

    Total 3,916 4,118 5.2 11,747 12,354 5.2
  Fiscal arrangements and other transfers 1,687 1,757 4.1 5,718 5,869 2.6
  Canada's cities and communities 0 0 n/a 0 0 n/a
  Quebec Abatement -384 -381 -0.8 -1,153 -1,144 -0.8
 

  Total 5,219 5,494 5.3 16,312 17,079 4.7
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 113 59 -47.8 175 141 -19.4
    Employment and Social Development Canada 733 716 -2.3 1,374 1,393 1.4
    Global Affairs Canada 171 170 -0.6 530 642 21.1
    Health Canada 201 257 27.9 861 984 14.3
    Indigenous and Northern Affairs Canada 334 376 12.6 1,597 1,781 11.5
    Innovation, Science and
      Economic Development Canada
239 165 -31.0 531 533 0.4
    Other 910 2,027 122.7 2,368 3,739 57.9
 

    Total 2,701 3,770 39.6 7,436 9,213 23.9
  Other direct program expenses
    Crown corporations 661 836 26.5 2,030 2,315 14.0
    National Defence 1,633 1,814 11.1 4,620 5,173 12.0
    All other departments
      and agencies
3,719 4,075 9.6 10,409 11,309 8.6
 

    Total other direct program expenses 6,013 6,725 11.8 17,059 18,797 10.2
 

  Total direct program expenses 8,714 10,495 20.4 24,495 28,010 14.3
 

Total program expenses 21,269 22,862 7.5 61,296 66,396 8.3
Public debt charges 1,930 1,990 3.1 7,008 6,384 -8.9
 

Total expenses 23,199 24,852 7.1 68,304 72,780 6.6

Note: Totals may not add due to rounding.

 
Table 4
The budgetary balance and financial source/requirement
$ millions
  June April to June
 

  2015 2016 2015–16 2016–17
Budgetary balance (deficit/surplus) 1,066 -1,109 5,011 -995
Non-budgetary transactions
  Capital investment activities -561 -153 -724 -431
  Other investing activities -172 -531 -294 -1,904
  Pension and other accounts -152 355 253 922
  Other activities    
    Accounts payable, receivables, accruals and allowances -4,887 -6,853 -12,963 -11,062
    Foreign exchange activities 478 3,121 2,284 -1,035
    Amortization of tangible capital assets 413 104 1,181 928
 

    Total other activities -3,996 -3,628 -9,498 -11,169
 

  Total non-budgetary transactions -4,881 -3,957 -10,263 -12,582
 

Financial source/requirement -3,815 -5,066 -5,252 -13,577
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  June April to June
 

  2015 2016 2015–16 2016–17
Financial source/requirement -3,815 -5,066 -5,252 -13,577
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds -7,689 -11,935 -987 168
      Treasury bills -2,800 4,800 5,200 14,000
      Retail debt -21 -76 -58 68
 

      Total -10,510 -7,211 4,155 14,236
    Foreign currency borrowings 1,593 -159 1,059 1,089
 

    Total -8,917 -7,370 5,214 15,325
    Cross-currency swap revaluation 542 -1,803 -215 -1,399
    Unamortized discounts and premiums on market debt 176 201 393 419
    Obligations related to capital leases and other unmatured debt -38 -43 -91 -94
 

  Net change in financing activities -8,237 -9,015 5,301 14,251
Change in cash balance -12,052 -14,081 49 674
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.

August 2016