The Fiscal Monitor
A publication of the Department of Finance

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December 2016: budgetary deficit of $1.3 billion

There was a budgetary deficit of $1.3 billion in December 2016, compared to a surplus of $2.2 billion in December 2015. Revenues decreased by $0.8 billion, or 3.0 per cent, reflecting decreases in personal income tax revenues and other revenues. Program expenses increased by $2.7 billion, or 13.0 per cent, largely reflecting increases in major transfers to persons and direct program expenses. Public debt charges increased by $49 million, or 2.5 per cent.

April to December 2016: budgetary deficit of $14.0 billion

For the April to December 2016 period of the 2016–17 fiscal year, the Government posted a budgetary deficit of $14.0 billion, compared to a surplus of $3.2 billion reported in the same period of 2015–16. Revenues were down $1.9 billion, or 0.9 per cent, reflecting decreases in income tax revenues, excise taxes and duties, and other revenues. Program expenses were up $16.7 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 were down $1.4 billion, or 7.0 per cent, largely reflecting lower average effective interest rates on the stock of interest-bearing debt.

December 2016

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There was a budgetary deficit of $1.3 billion in December 2016, compared to a surplus of $2.2 billion in December 2015.

Revenues in December 2016 totalled $24.1 billion, down $0.8 billion, or 3.0 per cent, from December 2015.

  • Personal income tax revenues were down $1.0 billion, or 7.1 per cent.   
  • Corporate income tax revenues were up $0.7 billion, or 21.4 per cent.
  • Non-resident income tax revenues were up $0.1 billion, or 19.2 per cent.
  • Excise taxes and duties were up $19 million, or 0.5 per cent. Within this category, Goods and Services Tax (GST) revenues increased by $0.1 billion, energy taxes decreased by $26 million, customs import duties increased by $12 million, and other excise taxes and duties decreased by $41 million.
  • Employment Insurance (EI) premium revenues were up $8 million, or 0.8 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, decreased by $0.6 billion, or 28.7 per cent.

Program expenses in December 2016 were $23.4 billion, up $2.7 billion, or 13.0 per cent, from December 2015. 

  • Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.9 billion, or 12.8 per cent. Elderly benefits increased by $0.3 billion, or 8.5 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 4.3 per cent. Children's benefits increased by $0.5 billion, or 33.2 per cent, reflecting the new Canada Child Benefit, which 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 $25 million, or 0.5 per cent, as legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories was partially offset by a decrease in transfers to Canada's cities and communities, reflecting year-over-year timing differences.
  • Direct program expenses include transfer payments to individuals and organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of the operating expenses of National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $1.8 billion, or 21.3 per cent. Within direct program expenses:
    • Transfer payments increased by $2.0 billion, or 150.7 per cent, primarily reflecting the accelerated repayment of contributions by Pratt & Whitney Canada in December 2015, which decreased transfer payments in that month, as well as increases in transfers across several departments in the current year, including claims expenses and infrastructure funding.
    • Other direct program expenses decreased by $0.2 billion, or 2.4 per cent.

Public debt charges increased by $49 million, or 2.5 per cent.

April to December 2016

For the April to December 2016 period of the 2016–17 fiscal year, there was a budgetary deficit of $14.0 billion, compared to a surplus of $3.2 billion reported during the same period of 2015–16.

Revenues decreased by $1.9 billion, or 0.9 per cent, to $210.2 billion.

  • Personal income tax revenues were down $1.0 billion, or 0.9 per cent. 
  • Corporate income tax revenues were up $0.6 billion, or 2.1 per cent.
  • Non-resident income tax revenues were up $0.2 billion, or 4.2 per cent.
  • Excise taxes and duties were down $32 million, or 0.1 per cent. GST revenues and customs import duties were each up $0.1 billion, while energy taxes and other excise taxes and duties each decreased by $0.1 billion. 
  • EI premium revenues were up $0.2 billion, or 1.5 per cent, reflecting growth in earnings.
  • Other revenues were down $1.9 billion, or 8.6 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.

For the April to December 2016 period, program expenses were $205.7 billion, up $16.7 billion, or 8.8 per cent, from the same period the previous year. 

  • Major transfers to persons were up $5.7 billion, or 9.3 per cent. Elderly benefits increased by $2.0 billion, or 5.9 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.9 billion, or 6.6 per cent. Children's benefits were up $2.8 billion, or 20.5 per cent, largely reflecting the new Canada Child Benefit.  
  • Major transfers to other levels of government were up $2.2 billion, or 4.4 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 $8.9 billion, or 11.3 per cent. Within direct program expenses:
    • Transfer payments increased by $5.3 billion, or 25.3 per cent, reflecting a number of factors including the accelerated repayment of contributions by Pratt & Whitney Canada in 2015–16, which decreased transfer payments in that year, as well as increased transfers in the current year related to claims and infrastructure funding.
    • Other direct program expenses increased by $3.5 billion, or 6.1 per cent, largely reflecting increases in pension and other future benefit expenses based on the Government's latest actuarial valuations, operating expenses of National Defence, and Crown corporation expenses.

Public debt charges decreased by $1.4 billion, or 7.0 per cent, largely reflecting lower average effective interest rates on the stock of interest-bearing debt.

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

Financial requirement of $26.0 billion for April to December 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 $14.0 billion and a financial requirement of $12.0 billion from non-budgetary transactions, there was a financial requirement of $26.0 billion for the April to December 2016 period, compared to a financial requirement of $17.7 billion for the same period the previous year.

Net financing activities up $26.9 billion

The Government financed this financial requirement of $26.0 billion and increased cash balances by $0.9 billion by increasing unmatured debt by $26.9 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds.

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 December 2016 stood at $38.7 billion, down $0.3 billion from their level at the end of December 2015.

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

  2015 2016 2015–16 2016–17
Budgetary transactions        
  Revenues 24,860 24,105 212,063 210,182
  Expenses
    Program expenses -20,731 -23,428 -189,031 -205,724
    Public debt charges -1,956 -2,005 -19,833 -18,450
 

  Budgetary balance (deficit/surplus) 2,173 -1,328 3,199 -13,992
Non-budgetary transactions -7,170 -524 -20,910 -12,026
 

Financial source/requirement -4,997 -1,852 -17,711 -26,018
Net change in financing activities -3,503 -725 28,714 26,870
 

Net change in cash balances -8,500 -2,577 11,003 852
Cash balance at end of period 38,953 38,695
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  December   April to December  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 13,839 12,856 -7.1 103,299 102,334 -0.9
    Corporate income tax 3,460 4,200 21.4 28,423 29,026 2.1
    Non-resident income tax 510 608 19.2 4,438 4,626 4.2
 

    Total income tax 17,809 17,664 -0.8 136,160 135,986 -0.1
  Excise taxes and duties
    Goods and Services Tax 2,437 2,511 3.0 25,876 25,967 0.4
    Energy taxes 498 472 -5.2 4,301 4,217 -2.0
    Customs import duties 388 400 3.1 4,007 4,065 1.4
    Other excise taxes and duties 532 491 -7.7 4,645 4,548 -2.1
 

    Total excise taxes and duties 3,855 3,874 0.5 38,829 38,797 -0.1
 

  Total tax revenues 21,664 21,538 -0.6 174,989 174,783 -0.1
Employment Insurance premiums 975 983 0.8 15,021 15,244 1.5
Other revenues 2,221 1,584 -28.7 22,053 20,155 -8.6
 

Total revenues 24,860 24,105 -3.0 212,063 210,182 -0.9
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  December   April to December  
 
 
 
  2015
($ millions)
2016
($ millions)
Change
(%)
2015–16
($ millions)
2016–17
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,754 4,072 8.5 33,841 35,847 5.9
  Employment Insurance benefits 1,579 1,647 4.3 13,853 14,764 6.6
  Children's benefits 1,472 1,960 33.2 13,449 16,203 20.5
 

  Total 6,805 7,679 12.8 61,143 66,814 9.3
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 2,836 3,006 6.0 25,518 27,051 6.0
    Canada Social Transfer 1,080 1,112 3.0 9,719 10,011 3.0
 

    Total 3,916 4,118 5.2 35,237 37,062 5.2
  Fiscal arrangements and other transfers 1,687 1,731 2.6 15,859 16,340 3.0
  Canada's cities and communities 285 66 -76.8 1,882 1,766 -6.2
  Quebec Abatement -396 -398 0.5 -3,562 -3,581 0.5
 

  Total 5,492 5,517 0.5 49,416 51,587 4.4
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 45 376 735.6 847 916 8.1
    Employment and Social Development Canada 365 525 43.8 3,968 4,652 17.2
    Global Affairs Canada 361 308 -14.7 2,007 2,237 11.5
    Health Canada 245 220 -10.2 2,263 2,369 4.7
    Indigenous and Northern Affairs Canada 450 662 47.1 4,674 6,020 28.8
    Innovation, Science and Economic Development Canada -968 288 -129.8 584 2,376 306.8
    Other 808 895 10.8 6,743 7,856 16.5
 

    Total 1,306 3,274 150.7 21,086 26,426 25.3
  Other direct program expenses
    Crown corporations 968 840 -13.2 6,417 6,992 9.0
    National Defence 2,090 2,024 -3.2 16,855 17,868 6.0
    All other departments
      and agencies
4,070 4,094 0.6 34,114 36,037 5.6
 

    Total other direct program expenses 7,128 6,958 -2.4 57,386 60,897 6.1
 

  Total direct program expenses 8,434 10,232 21.3 78,472 87,323 11.3
 

Total program expenses 20,731 23,428 13.0 189,031 205,724 8.8
Public debt charges 1,956 2,005 2.5 19,833 18,450 -7.0
 

Total expenses 22,687 25,433 12.1 208,864 224,174 7.3

Note: Totals may not add due to rounding.

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

  2015 2016 2015–16 2016–17
Budgetary balance (deficit/surplus) 2,173 -1,328 3,199 -13,992
Non-budgetary transactions
  Capital investment activities -350 -678 -3,032 -3,226
  Other investing activities -1,802 -266 -6,147 -7,140
  Pension and other accounts 311 1,363 3,477 5,719
  Other activities    
    Accounts payable, receivables, accruals and allowances 94 -1,840 -6,171 -3,796
    Foreign exchange activities -5,741 547 -12,263 -6,495
    Amortization of tangible capital assets 318 350 3,226 2,912
 

    Total other activities -5,329 -943 -15,208 -7,379
 

  Total non-budgetary transactions -7,170 -524 -20,910 -12,026
 

Financial source/requirement -4,997 -1,852 -17,711 -26,018
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  December April to December
 

  2015 2016 2015–16 2016–17
Financial source/requirement -4,997 -1,852 -17,711 -26,018
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds -5,397 4,907 8,087 26,517
      Treasury bills -1,900 -5,300 11,600 -1,000
      Retail debt 427 581 -617 249
 

      Total -6,870 188 19,070 25,766
    Foreign currency borrowings 461 -677 3,416 617
 

    Total -6,409 -489 22,486 26,383
    Cross-currency swap revaluation 2,823 -239 5,802 -42
    Unamortized discounts and premiums on market debt 129 47 616 783
    Obligations related to capital leases and other unmatured debt -46 -44 -190 -254
 

  Net change in financing activities -3,503 -725 28,714 26,870
Change in cash balance -8,500 -2,577 11,003 852
Note: Totals may not add due to rounding.
 
Table 6
Condensed statement of assets and liabilities
$ millions
March 31,
2016
December 31,
2016
Change
Liabilities      
   Accounts payable and accrued liabilities 127,853 121,720 -6,133
   Interest-bearing debt      
      Unmatured debt      
         Payable in Canadian currency      
            Marketable bonds 504,068 530,585 26,517
            Treasury bills 138,100 137,100 -1,000
            Retail debt 5,076 5,325 249
 
            Subtotal 647,244 673,010 25,766
      Payable in foreign currencies 22,482 23,099 617
      Cross-currency swap revaluation 8,391 8,349 -42
      Unamortized discounts and premiums on market debt 5,047 5,830 783
      Obligations related to capital leases and other unmatured debt 5,047 4,793 -254
 
      Total unmatured debt 688,211 715,081 26,870
     Pension and other liabilities  
         Public sector pensions 152,227 151,869 -358
         Other employee and veteran future benefits 85,681 91,473 5,792
         Other liabilities 5,602 5,887 285
 
         Total pension and other liabilities 243,510 249,229 5,719
 
      Total interest-bearing debt 931,721 964,310 32,589
 
   Total liabilities 1,059,574 1,086,030 26,456
Financial assets  
   Cash and accounts receivable 154,688 153,203 -1,485
   Foreign exchange accounts 93,539 100,034 6,495
   Loans, investments, and advances (net of allowances)1 115,957 122,070 6,113
   Public sector pension assets 1,639 1,639 0
 
   Total financial assets 365,823 376,946 11,123
 
Net debt 693,751 709,084 15,333
Non-financial assets 77,765 78,079 314
 
Federal debt (accumulated deficit) 615,986 631,005 15,019
Note: Totals may not add due to rounding.
1 December 31, 2016 amount includes $1.0 billion in other comprehensive losses from enterprise Crown corporations and other government business enterprises for the April to December 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.

February 2017