The Fiscal Monitor
A publication of the Department of Finance

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September 2016: budgetary deficit of $2.4 billion

There was a budgetary deficit of $2.4 billion in September 2016, compared to a deficit of $1.2 billion in September 2015. Revenues decreased by $0.3 billion, or 1.5 per cent, as decreases in revenues from corporate income tax, non-resident income tax and excise taxes and duties were only partially offset by increases in other revenue streams. Program expenses were up $1.0 billion, or 4.8 per cent, due to increases in major transfers to persons and other levels of government. Public debt charges decreased by $0.2 billion, or 11.3 per cent, reflecting lower consumer price adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

April to September 2016: budgetary deficit of $7.8 billion

For the April to September 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $7.8 billion, compared to a surplus of $1.6 billion reported in the same period of 2015–16. Revenues were down $1.9 billion, or 1.3 per cent, largely as a result of decreases in other revenues and excise taxes and duties. Program expenses were up $8.9 billion, or 7.0 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $1.4 billion, or 9.8 per cent, largely due to a lower average effective interest rate on the stock of interest-bearing debt.

September 2016

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There was a budgetary deficit of $2.4 billion in September 2016, compared to a deficit of $1.2 billion in September 2015.

Revenues in September 2016 totalled $21.7 billion, down $0.3 billion, or 1.5 per cent, from September 2015.

  • Personal income tax revenues were up $0.3 billion, or 2.7 per cent.
  • Corporate income tax revenues were down $0.4 billion, or 11.7 per cent.
  • Non-resident income tax revenues were down $0.2 billion, or 31.1 per cent.
  • Excise taxes and duties were down $0.1 billion, or 2.2 per cent. Goods and Services Tax (GST) revenues decreased by $12 million. Energy taxes decreased by $3 million, customs import duties decreased by $24 million, and other excise taxes and duties decreased by $0.1 billion.
  • Employment Insurance (EI) premium revenues were up $16 million, or 1.2 per cent. 
  • 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 2.4 per cent.

Program expenses in September 2016 were $22.2 billion, up $1.0 billion, or 4.8 per cent, from September 2015.

  • Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.9 billion, or 14.1 per cent. Elderly benefits increased by $0.3 billion, or 6.9 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 $0.2 billion, or 14.1 per cent. Children's benefits increased by $0.5 billion, or 31.9 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 $0.2 billion, or 2.9 per cent, 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 National Defence, other departments and agencies, and expenses of consolidated Crown corporations. Direct program expenses were down $0.1 billion, or 0.7 per cent. Within direct program expenses:
    • Transfer payments decreased by $0.6 billion, or 19.2 per cent, largely reflecting a decrease in the Government's liability for disaster assistance in the current year based on revised cost estimates.
    • Other direct program expenses increased by $0.5 billion, or 7.9 per cent, due mainly to an increase in pension and other employee and veteran future benefit expenses based on the Government's latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges decreased by $0.2 billion, or 11.3 per cent, reflecting lower consumer price adjustments on Real Return Bonds and a lower average effective interest rate on the stock of interest-bearing debt.

April to September 2016

For the April to September 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $7.8 billion, compared to a surplus of $1.6 billion reported in the same period of 2015–16.

Revenues decreased by $1.9 billion, or 1.3 per cent, to $139.4 billion.

  • Personal income tax revenues were up $0.5 billion, or 0.7 per cent. 
  • Corporate income tax revenues were down $0.1 billion, or 0.6 per cent.
  • Non-resident income tax revenues were down $0.3 billion, or 8.9 per cent. 
  • Excise taxes and duties were down $0.7 billion, or 2.8 per cent. GST revenues were down $0.5 billion, or 3.0 per cent. Customs import duties were down $14 million, and energy taxes and other excise taxes and duties were each down $0.1 billion. 
  • EI premium revenues were up $0.2 billion, or 1.6 per cent, reflecting growth in earnings.
  • Other revenues were down $1.4 billion, or 9.1 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, offset in part by growth in other components in the current year, including interest and penalties revenues.

For the April to September 2016 period, program expenses were $134.7 billion, up $8.9 billion, or 7.0 per cent, from the same period the previous year.

  • Major transfers to persons were up $3.2 billion, or 7.9 per cent. Elderly benefits increased by $1.2 billion, or 5.3 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.7 billion, or 7.0 per cent. Children's benefits were up $1.4 billion, or 15.4 per cent, largely reflecting the new Canada Child Benefit.
  • Major transfers to other levels of government were up $1.5 billion, or 4.7 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.  
  • Direct program expenses were up $4.1 billion, or 7.8 per cent. Within direct program expenses:
    • Transfer payments increased by $1.6 billion, or 10.6 per cent, reflecting increases across several departments, including the accrual of liabilities for disaster assistance, claims expenses and increased funding of new and existing programs.   
    • Other direct program expenses increased by $2.5 billion, or 6.7 per cent, due in large part to an increase in pension and other employee and veteran future benefit expenses based on the Government's latest actuarial valuations, as well as an increase in operating expenses of Crown corporations.

Public debt charges were down $1.4 billion, or 9.8 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

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

Financial requirement of $20.4 billion for April to September 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 $7.8 billion and a requirement of $12.6 billion from non-budgetary transactions, there was a financial requirement of $20.4 billion for the April to September 2016 period, compared to a financial requirement of $15.3 billion for the same period the previous year. 

Net financing activities up $24.2 billion

The Government financed this financial requirement of $20.4 billion and increased cash balances by $3.7 billion by increasing unmatured debt by $24.2 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 September 2016 stood at $41.6 billion, up $3.1 billion from their level at the end of September 2015. 

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

  2015 2016 2015–16 2016–17
Budgetary transactions        
  Revenues 21,981 21,658 141,336 139,446
  Expenses
    Program expenses -21,218 -22,239 -125,883 -134,738
    Public debt charges -2,012 -1,785 -13,879 -12,519
 

  Budgetary balance (deficit/surplus) -1,249 -2,366 1,574 -7,811
Non-budgetary transactions -477 1,019 -16,847 -12,636
 

Financial source/requirement -1,726 -1,347 -15,273 -20,447
Net change in financing activities 3,389 -520 25,743 24,155
 

Net change in cash balances 1,663 -1,867 10,470 3,708
Cash balance at end of period 38,420 41,553
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  September   April to September  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 10,280 10,554 2.7 66,250 66,703 0.7
    Corporate income tax 3,180 2,809 -11.7 18,407 18,295 -0.6
    Non-resident income tax 639 440 -31.1 3,085 2,811 -8.9
 

    Total income tax 14,099 13,803 -2.1 87,742 87,809 0.1
  Excise taxes and duties
    Goods and Services Tax 2,786 2,774 -0.4 17,640 17,115 -3.0
    Energy taxes 509 506 -0.6 2,845 2,751 -3.3
    Customs import duties 499 475 -4.8 2,726 2,712 -0.5
    Other excise taxes and duties 551 496 -10.0 3,131 3,031 -3.2
 

    Total excise taxes and duties 4,345 4,251 -2.2 26,342 25,609 -2.8
 

  Total tax revenues 18,444 18,054 -2.1 114,084 113,418 -0.6
Employment Insurance premiums 1,384 1,400 1.2 11,763 11,950 1.6
Other revenues 2,153 2,204 2.4 15,489 14,078 -9.1
 

Total revenues 21,981 21,658 -1.5 141,336 139,446 -1.3
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  September   April to September  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,748 4,008 6.9 22,418 23,615 5.3
  Employment Insurance benefits 1,363 1,555 14.1 9,376 10,032 7.0
  Children's benefits 1,509 1,990 31.9 8,963 10,346 15.4
 

  Total 6,620 7,553 14.1 40,757 43,993 7.9
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 2,836 3,006 6.0 17,013 18,034 6.0
    Canada Social Transfer 1,080 1,112 3.0 6,480 6,674 3.0
 

    Total 3,916 4,118 5.2 23,493 24,708 5.2
  Fiscal arrangements and other transfers 1,688 1,731 2.5 10,796 11,148 3.3
  Canada's cities and communities 0 0 n/a 979 1,036 5.8
  Quebec Abatement -386 -481 24.6 -2,308 -2,388 3.5
 

  Total 5,218 5,368 2.9 32,960 34,504 4.7
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 189 70 -63.0 543 372 -31.5
    Employment and Social Development Canada 476 696 46.2 2,615 2,930 12.0
    Global Affairs Canada 461 155 -66.4 1,262 1,282 1.6
    Health Canada 334 365 9.3 1,594 1,711 7.3
    Indigenous and Northern Affairs Canada 417 565 35.5 3,105 3,507 12.9
    Innovation, Science and
      Economic Development Canada
208 168 -19.2 1,161 1,289 11.0
    Other 875 372 -57.5 4,521 5,276 16.7
 

    Total 2,960 2,391 -19.2 14,801 16,367 10.6
  Other direct program expenses
    Crown corporations 721 867 20.2 4,074 4,590 12.7
    National Defence 1,965 2,030 3.3 10,774 11,563 7.3
    All other departments
      and agencies
3,734 4,030 7.9 22,517 23,721 5.3
 

    Total other direct program expenses 6,420 6,927 7.9 37,365 39,874 6.7
 

  Total direct program expenses 9,380 9,318 -0.7 52,166 56,241 7.8
 

Total program expenses 21,218 22,239 4.8 125,883 134,738 7.0
Public debt charges 2,012 1,785 -11.3 13,879 12,519 -9.8
 

Total expenses 23,230 24,024 3.4 139,762 147,257 5.4

Note: Totals may not add due to rounding.

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

  2015 2016 2015–16 2016–17
Budgetary balance (deficit/surplus) -1,249 -2,366 1,574 -7,811
Non-budgetary transactions
  Capital investment activities -428 -488 -1,803 -1,670
  Other investing activities -1,872 -2,035 -3,028 -5,247
  Pension and other accounts 709 603 2,571 3,488
  Other activities    
    Accounts payable, receivables, accruals and allowances 2,583 3,337 -10,827 -7,100
    Foreign exchange activities -1,836 -771 -5,983 -4,035
    Amortization of tangible capital assets 367 373 2,223 1,928
 

    Total other activities 1,114 2,939 -14,587 -9,207
 

  Total non-budgetary transactions -477 1,019 -16,847 -12,636
 

Financial source/requirement -1,726 -1,347 -15,273 -20,447
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  September April to September
 

  2015 2016 2015–16 2016–17
Financial source/requirement -1,726 -1,347 -15,273 -20,447
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds 855 -2,216 5,140 9,063
      Treasury bills 2,200 1,900 13,600 13,900
      Retail debt -7 36 -108 139
 

      Total 3,048 -280 18,632 23,102
    Foreign currency borrowings -546 -281 2,937 812
 

    Total 2,502 -561 21,569 23,914
    Cross-currency swap revaluation 812 -15 3,835 -269
    Unamortized discounts and premiums on market debt 61 70 445 646
    Obligations related to capital leases and other unmatured debt 14 -14 -106 -136
 

  Net change in financing activities 3,389 -520 25,743 24,155
Change in cash balance 1,663 -1,867 10,470 3,708
Note: Totals may not add due to rounding.
 
Table 6
Condensed statement of assets and liabilities
$ millions
March 31,
2016
September 30,
2016
Change
Liabilities
   Accounts payable and accrued liabilities 127,853 112,723 -15,130
   Interest-bearing debt
      Unmatured debt
         Payable in Canadian currency
            Marketable bonds 504,068 513,131 9,063
            Treasury bills 138,100 152,000 13,900
            Retail debt 5,076 5,215 139
 
            Subtotal 647,244 670,346 23,102
      Payable in foreign currencies 22,482 23,294 812
      Cross-currency swap revaluation 8,391 8,122 -269
      Unamortized discounts and premiums on market debt 5,047 5,693 646
      Obligations related to capital leases and other unmatured debt 5,047 4,911 -136
 
      Total unmatured debt 688,211 712,366 24,155
     Pension and other liabilities  
         Public sector pensions 152,227 151,806 -421
         Other employee and veteran future benefits 85,681 89,532 3,851
         Other liabilities 5,602 5,660 58
 
         Total pension and other liabilities 243,510 246,998 3,488
 
      Total interest-bearing debt 931,721 959,364 27,643
 
   Total liabilities 1,059,574 1,072,087 12,513
Financial assets
   Cash and accounts receivable 154,688 150,366 -4,322
   Foreign exchange accounts 93,539 97,574 4,035
   Loans, investments, and advances (net of allowances)1 115,957 119,974 4,017
   Public sector pension assets 1,639 1,639 0
 
   Total financial assets 365,823 369,553 3,730
 
Net debt 693,751 702,534 8,783
Non-financial assets 77,765 77,507 -258
 
Federal debt (accumulated deficit) 615,986 625,027 9,041
Note: Totals may not add due to rounding.
1 September 30, 2016 amount includes $1.2 billion in other comprehensive losses from enterprise Crown corporations and other government business enterprises for the April to September 2016 period.

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.

November 2016