The Fiscal Monitor
A publication of the Department of Finance

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July 2017: budgetary deficit of $0.2 billion

There was a budgetary deficit of $0.2 billion in July 2017, compared to a deficit of $1.8 billion in July 2016. Revenues increased by $3.0 billion, or 12.8 per cent, as an increase in tax revenues was partially offset by decreases in Employment Insurance (EI) premium revenues and other revenues. Program expenses increased by $1.6 billion, or 7.0 per cent, primarily reflecting increases in major transfers to persons and direct program expenses. Public debt charges decreased by $0.2 billion, or 9.7 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 2017: budgetary deficit of $0.1 billion

For the April to July 2017 period of the 2017–18 fiscal year, the Government posted a budgetary deficit of $0.1 billion, compared to a deficit of $2.8 billion reported in the same period of 2016–17. Revenues were up $6.4 billion, or 6.8 per cent, as increases in tax revenues and other revenues were partially offset by a decrease in EI premium revenues. Program expenses were up $4.3 billion, or 4.8 per cent, due to increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $0.5 billion, or 5.6 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

July 2017

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There was a budgetary deficit of $0.2 billion in July 2017, compared to a deficit of $1.8 billion in July 2016.

Revenues increased by $3.0 billion, or 12.8 per cent, to $26.1 billion.

  • Personal income tax revenues were up $0.8 billion, or 6.8 per cent.
  • Corporate income tax revenues were up $1.3 billion, or 59.4 per cent.
  • Non-resident income tax revenues were up $0.3 billion, or 66.3 per cent.
  • Excise taxes and duties were up $0.8 billion, or 18.5 per cent. This increase is mostly due to a $0.7-billion, or 23.6-per-cent, increase in Goods and Services Tax (GST) revenues. Energy taxes and customs import duties were each up $0.1 billion, while other excise taxes and duties were down $42 million.
  • EI premium revenues were down $0.2 billion, or 11.8 per cent, due to a reduction in the EI premium rate for 2017.
  • 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 2.3 per cent. 

Program expenses in July 2017 were $24.3 billion, up $1.6 billion, or 7.0 per cent, from July 2016. 

  • Major transfers to persons, consisting of elderly, EI and children's benefits, increased by $0.5 billion, or 6.5 per cent. Elderly benefits increased by $0.3 billion, or 6.6 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 14.9 per cent. Children's benefits decreased by $6 million, or 0.3 per cent. 
  • 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 $0.1 billion, or 2.3 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 consolidated Crown corporations. Direct program expenses were up $1.0 billion, or 10.8 per cent.
    • Transfer payments increased by $0.3 billion, or 13.8 per cent, reflecting year-over-year differences in the timing of payments.
    • Other direct program expenses increased by $0.6 billion, or 9.7 per cent, largely reflecting increases in operating expenses of consolidated Crown corporations and pension and benefit costs based on the Government's latest actuarial valuations.

Public debt charges decreased by $0.2 billion, or 9.7 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 2017

For the April to July 2017 period of the 2017–18 fiscal year, there was a budgetary deficit of $0.1 billion, compared to a deficit of $2.8 billion reported during the same period of 2016–17. 

Revenues increased by $6.4 billion, or 6.8 per cent, to $101.3 billion.

  • Personal income tax revenues were up $2.6 billion, or 5.7 per cent. 
  • Corporate income tax revenues were up $1.9 billion, or 14.8 per cent.
  • Non-resident income tax revenues were up $0.6 billion, or 35.2 per cent. 
  • Excise taxes and duties were up $2.2 billion, or 12.8 per cent. This increase is mostly due to a $1.9-billion, or 16.1-per-cent, increase in GST revenues. Energy taxes were up $0.1 billion and customs import duties were up $0.2 billion. Other excise taxes and duties were down $38 million.
  • EI premium revenues were down $1.0 billion, or 11.3 per cent, due to a reduction in the EI premium rate for 2017.
  • Other revenues were up $0.2 billion, or 2.0 per cent.

For the April to July 2017 period, program expenses were $93.4 billion, up $4.3 billion, or 4.8 per cent, from the same period the previous year. 

  • Major transfers to persons were up $2.4 billion, or 8.5 per cent. Elderly benefits increased by $0.9 billion, or 6.0 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 2.7 per cent. Children's benefits were up $1.3 billion, or 20.2 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 were up $0.6 billion, or 2.5 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 were up $1.2 billion, or 3.4 per cent.
    • Transfer payments decreased by $0.4 billion, or 3.4 per cent, due mainly to a year-over-year decrease in transfers for disaster assistance.
    • Other direct program expenses increased by $1.6 billion, or 6.5 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 consolidated Crown corporations. 

Public debt charges decreased by $0.5 billion, or 5.6 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

 
Revenues and expenses (April to July 2017)
Revenues and expenses (April to July 2017) - For details, refer to preceding paragraphs.
Note: Totals may not add due to rounding.

Financial requirement of $11.8 billion for April to July 2017

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 $0.1 billion and a requirement of $11.7 billion from non-budgetary transactions, there was a financial requirement of $11.8 billion for the April to July 2017 period, compared to a financial requirement of $17.4 billion for the same period the previous year. 

Net financing activities up $16.6 billion

The Government financed this financial requirement of $11.8 billion and increased cash balances by $4.8 billion by increasing unmatured debt by $16.6 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 2017 stood at $41.7 billion, down $5.6 billion from their level at the end of July 2016. 

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

  2016 2017 2016–17 2017–18
Budgetary transactions        
  Revenues 23,105 26,058 94,890 101,328
  Expenses
    Program expenses -22,716 -24,306 -89,112 -93,374
    Public debt charges -2,153 -1,945 -8,537 -8,063
 

  Budgetary balance (deficit/surplus) -1,764 -193 -2,759 -109
Non-budgetary transactions -2,020 4,744 -14,601 -11,717
 

Financial source/requirement -3,784 4,551 -17,360 -11,826
Net change in financing activities 12,567 -5,322 26,818 16,623
 

Net change in cash balances 8,783 -771 9,458 4,797
Cash balance at end of period 47,303 41,698
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  July   April to July  
 
 
 
  2016
($ millions)
2017
($ millions)
Change
(%)
2016–17
($ millions)
2017–18
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 11,946 12,762 6.8 45,188 47,786 5.7
    Corporate income tax 2,143 3,417 59.4 12,621 14,487 14.8
    Non-resident income tax 511 850 66.3 1,820 2,461 35.2
 

    Total income tax 14,600 17,029 16.6 59,629 64,734 8.6
  Excise taxes and duties
    Goods and Services Tax 2,888 3,570 23.6 11,546 13,408 16.1
    Energy taxes 395 472 19.5 1,574 1,701 8.1
    Customs import duties 470 550 17.0 1,724 1,933 12.1
    Other excise taxes and duties 548 506 -7.7 2,008 1,970 -1.9
 

    Total excise taxes and duties 4,301 5,098 18.5 16,852 19,012 12.8
 

  Total tax revenues 18,901 22,127 17.1 76,481 83,746 9.5
Employment Insurance premiums 1,871 1,651 -11.8 8,952 7,937 -11.3
Other revenues 2,333 2,280 -2.3 9,457 9,645 2.0
 

Total revenues 23,105 26,058 12.8 94,890 101,328 6.8
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  July   April to July  
 
 
 
  2016
($ millions)
2017
($ millions)
Change
(%)
2016–17
($ millions)
2017–18
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,947 4,208 6.6 15,666 16,612 6.0
  Employment Insurance benefits 1,470 1,689 14.9 6,469 6,643 2.7
  Children's benefits 1,839 1,833 -0.3 6,430 7,728 20.2
 

  Total 7,256 7,730 6.5 28,565 30,983 8.5
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 3,006 3,096 3.0 12,023 12,383 3.0
    Canada Social Transfer 1,112 1,146 3.1 4,449 4,583 3.0
 

    Total 4,118 4,242 3.0 16,472 16,966 3.0
  Fiscal arrangements and other transfers 1,750 1,791 2.3 7,620 7,784 2.2
  Canada's cities and communities 1,036 1,036 0.0 1,036 1,036 0.0
  Quebec Abatement -381 -397 4.2 -1,526 -1,587 4.0
 

  Total 6,523 6,672 2.3 23,602 24,199 2.5
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 65 71 9.2 205 203 -1.0
    Employment and Social Development Canada 388 491 26.5 1,781 2,049 15.0
    Global Affairs Canada 310 302 -2.6 952 846 -11.1
    Health Canada 297 339 14.1 1,282 1,396 8.9
    Indigenous and Northern Affairs Canada 601 687 14.3 2,383 2,568 7.8
    Innovation, Science and Economic Development Canada 302 238 -21.2 836 1,146 37.1
    Other 500 676 35.2 4,240 3,079 -27.4
 

    Total 2,463 2,804 13.8 11,679 11,287 -3.4
  Other direct program expenses
    Consolidated Crown corporations 740 938 26.8 3,055 3,521 15.3
    National Defence 1,990 2,189 10.0 7,164 7,677 7.2
    All other departments
      and agencies
3,744 3,973 6.1 15,047 15,707 4.4
 

    Total other direct program expenses 6,474 7,100 9.7 25,266 26,905 6.5
 

  Total direct program expenses 8,937 9,904 10.8 36,945 38,192 3.4
 

Total program expenses 22,716 24,306 7.0 89,112 93,374 4.8
Public debt charges 2,153 1,945 -9.7 8,537 8,063 -5.6
 

Total expenses 24,869 26,251 5.6 97,649 101,437 3.9

Note: Totals may not add due to rounding.

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

  2016 2017 2016–17 2017–18
Budgetary balance (deficit/surplus) -1,764 -193 -2,759 -109
Non-budgetary transactions
  Capital investment activities -330 329 -761 -406
  Other investing activities -845 -514 -2,748 1,102
  Pension and other accounts 508 651 1,430 1,186
  Other activities    
    Accounts payable, receivables, accruals and allowances -1,287 1,246 -12,349 -17,673
    Foreign exchange activities -351 3,628 -1,386 3,568
    Amortization of tangible capital assets 285 -596 1,213 506
 

    Total other activities -1,353 4,278 -12,522 -13,599
 

  Total non-budgetary transactions -2,020 4,744 -14,601 -11,717
 

Financial source/requirement -3,784 4,551 -17,360 -11,826
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  July April to July
 

  2016 2017 2016–17 2017–18
Financial source/requirement -3,784 4,551 -17,360 -11,826
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds 13,065 7,247 13,234 16,949
      Treasury bills -900 -9,200 13,100 4,600
      Retail debt 20 -155 89 -230
 

      Total 12,185 -2,108 26,423 21,319
    Foreign currency borrowings -631 -788 458 -756
 

    Total 11,554 -2,896 26,881 20,563
    Cross-currency swap revaluation 900 -2,390 -499 -3,425
    Unamortized discounts and premiums on market debt 126 -220 544 -595
    Obligations related to capital leases and other unmatured debt -13 184 -108 80
 

  Net change in financing activities 12,567 -5,322 26,818 16,623
Change in cash balance 8,783 -771 9,458 4,797
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 2017