The Fiscal Monitor
A publication of the Department of Finance

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July 2016: budgetary deficit of $1.8 billion

There was a budgetary deficit of $1.8 billion in July 2016, compared to a surplus of $0.2 billion in July 2015. Revenues decreased by $0.8 billion, or 3.1 per cent, due mainly to lower corporate income tax and Goods and Services Tax (GST) revenues. Program expenses increased by $1.4 billion, or 6.5 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by $0.2 billion, or 9.2 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

April to July 2016: budgetary deficit of $2.8 billion

For the April to July 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $2.8 billion, compared to a surplus of $5.2 billion reported in the same period of 2015–16. Revenues were down $2.3 billion, or 2.3 per cent, reflecting decreases in other revenues and excise taxes and duties. Program expenses were up $6.5 billion, or 7.8 per cent, due to increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $0.8 billion, or 9.0 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

July 2016

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There was a budgetary deficit of $1.8 billion in July 2016, compared to a surplus of $0.2 billion in July 2015.

Revenues decreased by $0.8 billion, or 3.1 per cent, to $23.1 billion.

  • Personal income tax revenues were up $0.5 billion, or 4.2 per cent.
  • Corporate income tax revenues were down $0.7 billion, or 24.5 per cent.
  • Non-resident income tax revenues were up $4 million, or 0.8 per cent.
  • Excise taxes and duties were down $0.4 billion, or 9.4 per cent. This decrease is mostly due to a $0.4‑billion, or 11.1-per-cent, decrease in GST revenues. Energy taxes and customs import duties were each down $0.1 billion, while other excise taxes and duties were up $0.1 billion.
  • Employment Insurance (EI) premium revenues were up $33 million, or 1.8 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 $0.1 billion, or 5.1 per cent. 

Program expenses in July 2016 were $22.7 billion, up $1.4 billion, or 6.5 per cent, from July 2015. 

  • Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.6 billion, or 9.7 per cent. Elderly benefits increased by $0.2 billion, or 6.3 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 9.0 per cent. Children’s benefits increased by $0.3 billion, or 18.4 per cent, reflecting the new Canada Child Benefit, which has replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 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 5.0 per cent, mainly due to legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization 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 National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $0.4 billion, or 5.1 per cent. Within direct program expenses:
    • Transfer payments increased by $0.2 billion, or 11.0 per cent.
    • Other direct program expenses increased by $0.2 billion, or 3.0 per cent.

Public debt charges decreased by $0.2 billion, or 9.2 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

April to July 2016

For the April to July 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $2.8 billion, compared to a surplus of $5.2 billion reported during the same period of 2015–16.

Revenues decreased by $2.3 billion, or 2.3 per cent, to $94.9 billion.

  • Personal income tax revenues were up $0.9 billion, or 2.0 per cent. 
  • Corporate income tax revenues were down $0.5 billion, or 3.9 per cent.
  • Non-resident income tax revenues were down $0.1 billion, or 3.1 per cent. 
  • Excise taxes and duties were down $0.9 billion, or 4.9 per cent. This fall is mostly due to a $0.6-billion, or 4.6-per-cent, decrease in GST revenues and a $0.3-billion, or 15.0-per-cent, decrease in energy taxes. Customs import duties were down $9 million, and other excise taxes and duties were down $35 million.
  • EI premium revenues were up $0.1 billion, or 1.6 per cent, reflecting growth in earnings.
  • Other revenues were down $1.8 billion, or 16.3 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 July 2016 period, program expenses were $89.1 billion, up $6.5 billion, or 7.8 per cent, from the same period the previous year. 

  • Major transfers to persons were up $1.5 billion, or 5.4 per cent. Elderly benefits increased by $0.7 billion, or 4.6 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.3 billion, or 4.9 per cent. Children’s benefits were up $0.5 billion, or 7.7 per cent, largely reflecting the new Canada Child Benefit, which has replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016.
  • Major transfers to other levels of government were up $1.1 billion, or 4.8 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer and Equalization transfers.  
  • Direct program expenses were up $3.9 billion, or 11.9 per cent. Within direct program expenses:
    • Transfer payments increased by $2.0 billion, or 21.0 per cent, reflecting year-over-year differences in the timing of the transfers and an increase in transfers for disaster assistance.
    • Other direct program expenses increased by $1.9 billion, or 8.2 per cent, due in large part to an increase in pension and benefit costs based on the Government’s latest actuarial valuations, as well as an increase in operating expenses of Crown corporations. 

Public debt charges decreased by $0.8 billion, or 9.0 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

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

Financial requirement of $17.4 billion for April to July 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 $2.8 billion and a requirement of $14.6 billion from non-budgetary transactions, there was a financial requirement of $17.4 billion for the April to July 2016 period, compared to a financial requirement of $14.2 billion for the same period the previous year.

Net financing activities up $26.8 billion

The Government financed this financial requirement of $17.4 billion and increased cash balances by $9.5 billion by increasing unmatured debt by $26.8 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 July 2016 stood at $47.3 billion, up $9.1 billion from their level at the end of July 2015.

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

  2015 2016 2015–16 2016–17
Budgetary transactions        
  Revenues 23,856 23,105 97,171 94,890
  Expenses
    Program expenses -21,334 -22,716 -82,630 -89,112
    Public debt charges -2,372 -2,153 -9,380 -8,537
 

  Budgetary balance (deficit/surplus) 150 -1,764 5,161 -2,759
Non-budgetary transactions -9,137 -2,020 -19,401 -14,601
 

Financial source/requirement -8,987 -3,784 -14,240 -17,360
Net change in financing activities 19,214 12,567 24,515 26,818
 

Net change in cash balances 10,227 8,783 10,275 9,458
Cash balance at end of period 38,226 47,303
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  July   April to July  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 11,467 11,946 4.2 44,317 45,188 2.0
    Corporate income tax 2,840 2,143 -24.5 13,138 12,621 -3.9
    Non-resident income tax 507 511 0.8 1,878 1,820 -3.1
 

    Total income tax 14,814 14,600 -1.4 59,333 59,629 0.5
  Excise taxes and duties
    Goods and Services Tax 3,250 2,888 -11.1 12,100 11,546 -4.6
    Energy taxes 476 395 -17.0 1,852 1,574 -15.0
    Customs import duties 526 470 -10.6 1,733 1,724 -0.5
    Other excise taxes and duties 494 548 10.9 2,043 2,008 -1.7
 

    Total excise taxes and duties 4,746 4,301 -9.4 17,728 16,852 -4.9
 

  Total tax revenues 19,560 18,901 -3.4 77,061 76,481 -0.8
Employment Insurance premiums 1,838 1,871 1.8 8,810 8,952 1.6
Other revenues 2,458 2,333 -5.1 11,300 9,457 -16.3
 

Total revenues 23,856 23,105 -3.1 97,171 94,890 -2.3
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  July   April to July  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,712 3,947 6.3 14,971 15,666 4.6
  Employment Insurance benefits 1,349 1,470 9.0 6,165 6,469 4.9
  Children's benefits 1,553 1,839 18.4 5,968 6,430 7.7
 

  Total 6,614 7,256 9.7 27,104 28,565 5.4
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 2,836 3,006 6.0 11,342 12,023 6.0
    Canada Social Transfer 1,080 1,112 3.0 4,320 4,449 3.0
 

    Total 3,916 4,118 5.2 15,662 16,472 5.2
  Fiscal arrangements and other transfers 1,703 1,750 2.8 7,421 7,620 2.7
  Canada's cities and communities 979 1,036 5.8 979 1,036 5.8
  Quebec Abatement -384 -381 -0.8 -1,538 -1,526 -0.8
 

  Total 6,214 6,523 5.0 22,524 23,602 4.8
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 72 65 -9.7 247 205 -17.0
    Employment and Social Development Canada 424 388 -8.5 1,798 1,781 -0.9
    Global Affairs Canada 132 310 134.8 662 952 43.8
    Health Canada 318 297 -6.6 1,179 1,282 8.7
    Indigenous and Northern Affairs Canada 546 601 10.1 2,143 2,383 11.2
    Innovation, Science and
      Economic Development Canada
177 302 70.6 707 836 18.2
    Other 550 500 -9.1 2,918 4,240 45.3
 

    Total 2,219 2,463 11.0 9,654 11,679 21.0
  Other direct program expenses
    Crown corporations 614 740 20.5 2,644 3,055 15.5
    National Defence 1,729 1,990 15.1 6,349 7,164 12.8
    All other departments
      and agencies
3,944 3,744 -5.1 14,355 15,047 4.8
 

    Total other direct program expenses 6,287 6,474 3.0 23,348 25,266 8.2
 

  Total direct program expenses 8,506 8,937 5.1 33,002 36,945 11.9
 

Total program expenses 21,334 22,716 6.5 82,630 89,112 7.8
Public debt charges 2,372 2,153 -9.2 9,380 8,537 -9.0
 

Total expenses 23,706 24,869 4.9 92,010 97,649 6.1

Note: Totals may not add due to rounding.

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

  2015 2016 2015–16 2016–17
Budgetary balance (deficit/surplus) 150 -1,764 5,161 -2,759
Non-budgetary transactions
  Capital investment activities -377 -330 -1,101 -761
  Other investing activities -593 -845 -888 -2,748
  Pension and other accounts 93 508 347 1,430
  Other activities    
    Accounts payable, receivables, accruals and allowances -3,890 -1,287 -16,854 -12,349
    Foreign exchange activities -4,679 -351 -2,395 -1,386
    Amortization of tangible capital assets 309 285 1,490 1,213
 

    Total other activities -8,260 -1,353 -17,759 -12,522
 

  Total non-budgetary transactions -9,137 -2,020 -19,401 -14,601
 

Financial source/requirement -8,987 -3,784 -14,240 -17,360
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  July April to July
 

  2015 2016 2015–16 2016–17
Financial source/requirement -8,987 -3,784 -14,240 -17,360
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds 8,750 13,065 7,763 13,234
      Treasury bills 6,000 -900 11,200 13,100
      Retail debt -21 20 -79 89
 

      Total 14,729 12,185 18,884 26,423
    Foreign currency borrowings 1,895 -631 2,954 458
 

    Total 16,624 11,554 21,838 26,881
    Cross-currency swap revaluation 2,626 900 2,410 -499
    Unamortized discounts and premiums on market debt -21 126 372 544
    Obligations related to capital leases and other unmatured debt -15 -13 -105 -108
 

  Net change in financing activities 19,214 12,567 24,515 26,818
Change in cash balance 10,227 8,783 10,275 9,458
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.

September 2016