The Fiscal Monitor
A publication of the Department of Finance

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August 2017: budgetary deficit of $2.6 billion

There was a budgetary deficit of $2.6 billion in August 2017, compared to a deficit of $2.7 billion in August 2016. Revenues decreased by $0.1 billion, or 0.6 per cent, reflecting decreases in income tax revenues, Employment Insurance (EI) premium revenues and other revenues. Program expenses decreased by $0.1 billion, or 0.2 per cent, as an increase in major transfers to other levels of government was more than offset by decreases in major transfers to persons and direct program expenses. Public debt charges decreased by $0.2 billion, or 8.3 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 August 2017: budgetary deficit of $2.7 billion

For the April to August 2017 period of the 2017–18 fiscal year, the Government posted a budgetary deficit of $2.7 billion, compared to a deficit of $5.4 billion reported in the same period of 2016–17. Revenues were up $6.3 billion, or 5.3 per cent, reflecting increases in income tax revenues and excise taxes and duties, partially offset by declines in EI premium revenues and other revenues. Program expenses were up $4.2 billion, or 3.7 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $0.7 billion, or 6.1 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

August 2017

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There was a budgetary deficit of $2.6 billion in August 2017, compared to a deficit of $2.7 billion in August 2016.

Revenues totalled $22.8 billion in August 2017, down $0.1 billion from August 2016.

  • Personal income tax revenues were up $0.1 billion, or 1.2 per cent.
  • Corporate income tax revenues were down $0.2 billion, or 5.5 per cent.
  • Non-resident income tax revenues were largely unchanged.
  • Excise taxes and duties were up $0.3 billion, or 6.7 per cent, driven mainly by a $0.3-billion, or 11.3-per-cent, increase in Goods and Services Tax (GST) revenues. Energy taxes were down $0.1 billion, while customs import duties were up $8 million and other excise taxes and duties were up $0.1 billion.
  • EI premium revenues were down $0.2 billion, or 12.6 per cent, reflecting a decline in the premium rate as a result of the seven-year break-even mechanism introduced in 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 $0.2 billion, or 8.9 per cent. 

Program expenses were $23.3 billion in August 2017, down $0.1 billion, or 0.2 per cent, from August 2016. 

  • Major transfers to persons, consisting of elderly, EI and children's benefits, decreased by $0.1 billion, or 1.4 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 decreased by $0.4 billion, or 17.5 per cent. Children's benefits decreased by $20 million, or 1.0 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 $0.3 billion, or 5.9 per cent, largely reflecting payments under the new home care and mental health transfers, announced in Budget 2017, in support of provincial and territorial home care and mental health initiatives.
  • 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 down $0.3 billion, or 2.7 per cent. Within direct program expenses:
    • Transfer payments increased by $0.1 billion, or 4.4 per cent.
    • Other direct program expenses decreased by $0.4 billion, or 4.8 per cent.

Public debt charges decreased by $0.2 billion, or 8.3 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 August 2017

For the April to August 2017 period of the 2017–18 fiscal year, there was a budgetary deficit of $2.7 billion, compared to a deficit of $5.4 billion reported in the same period of 2016–17.

Revenues increased by $6.3 billion, or 5.3 per cent, to $124.1 billion.

  • Personal income tax revenues were up $2.7 billion, or 4.9 per cent. 
  • Corporate income tax revenues were up $1.7 billion, or 11.0 per cent.
  • Non-resident income tax revenues were up $0.6 billion, or 27.1 per cent. 
  • Excise taxes and duties were up $2.5 billion, or 11.5 per cent. GST revenues were up $2.2 billion, or 15.2 per cent. Energy taxes were up $47 million, customs import duties were up $0.2 billion, and other excise taxes and duties were up $21 million. 
  • EI premium revenues were down $1.2 billion, or 11.5 per cent, reflecting a decline in the premium rate as a result of the seven-year break-even mechanism introduced in 2017. 
  • Other revenues were down $23 million, or 0.2 per cent.

For the April to August 2017 period, program expenses were $116.7 billion, up $4.2 billion, or 3.7 per cent, from the same period the previous year. 

  • Major transfers to persons were up $2.3 billion, or 6.3 per cent. Elderly benefits increased by $1.2 billion, or 6.2 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $0.2 billion, or 2.1 per cent. Children's benefits were up $1.3 billion, or 15.3 per cent, largely 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 $0.9 billion, or 3.2 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories, as well as payments under the new home care and mental health transfers.  
  • Direct program expenses were up $1.0 billion, or 2.1 per cent. Within direct program expenses:
    • Transfer payments decreased by $0.3 billion, or 2.1 per cent.
    • Other direct program expenses increased by $1.3 billion, or 3.9 per cent, due in large part to an increase in operating expenses of Crown corporations, as well as an increase in pension and benefit costs based on the Government's latest actuarial valuations. 

Public debt charges decreased by $0.7 billion, or 6.1 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

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

Financial requirement of $12.5 billion for April to August 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 $2.7 billion and a requirement of $9.8 billion from non-budgetary transactions, there was a financial requirement of $12.5 billion for the April to August 2017 period, compared to a financial requirement of $19.1 billion for the same period the previous year. 

Net financing activities up $13.8 billion

The Government financed this financial requirement of $12.5 billion and increased cash balances by $1.3 billion by increasing unmatured debt by $13.8 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 August 2017 stood at $38.2 billion, down $5.2 billion from their level at the end of August 2016. 

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

  2016 2017 2016–17 2017–18
Budgetary transactions        
  Revenues 22,898 22,762 117,789 124,090
  Expenses
    Program expenses -23,388 -23,335 -112,500 -116,709
    Public debt charges -2,196 -2,014 -10,734 -10,077
 

  Budgetary balance (deficit/surplus) -2,686 -2,587 -5,445 -2,696
Non-budgetary transactions 945 1,880 -13,654 -9,837
 

Financial source/requirement -1,741 -707 -19,099 -12,533
Net change in financing activities -2,142 -2,785 24,676 13,838
 

Net change in cash balances -3,883 -3,492 5,577 1,305
Cash balance at end of period 43,421 38,207
Note: Positive numbers indicate a net source of funds. Negative numbers indicate a net requirement for funds.
 
Table 2
Revenues
  August   April to August  
 
 
 
  2016
($ millions)
2017
($ millions)
Change
(%)
2016–17
($ millions)
2017–18
($ millions)
Change
(%)
Tax revenues            
  Income taxes            
    Personal income tax 10,962 11,095 1.2 56,149 58,882 4.9
    Corporate income tax 2,865 2,707 -5.5 15,487 17,194 11.0
    Non-resident income tax 551 552 0.2 2,371 3,013 27.1
 

    Total income tax 14,378 14,354 -0.2 74,007 79,089 6.9
  Excise taxes and duties
    Goods and Services Tax 2,794 3,110 11.3 14,341 16,517 15.2
    Energy taxes 671 592 -11.8 2,246 2,293 2.1
    Customs import duties 512 520 1.6 2,237 2,453 9.7
    Other excise taxes and duties 528 587 11.2 2,536 2,557 0.8
 

    Total excise taxes and duties 4,505 4,809 6.7 21,360 23,820 11.5
 

  Total tax revenues 18,883 19,163 1.5 95,367 102,909 7.9
Employment Insurance premiums 1,598 1,396 -12.6 10,550 9,332 -11.5
Other revenues 2,417 2,203 -8.9 11,872 11,849 -0.2
 

Total revenues 22,898 22,762 -0.6 117,789 124,090 5.3
Note: Totals may not add due to rounding.
 
Table 3
Expenses
  August   April to August  
 
 
 
  2016
($ millions)
2017
($ millions)
Change
(%)
2016–17
($ millions)
2017–18
($ millions)
Change
(%)
Major transfers to persons            
  Elderly benefits 3,941 4,200 6.6 19,606 20,812 6.2
  Employment Insurance benefits 2,008 1,657 -17.5 8,477 8,300 -2.1
  Children's benefits 1,926 1,906 -1.0 8,356 9,634 15.3
 

  Total 7,875 7,763 -1.4 36,439 38,746 6.3
Major transfers to other levels
  of government
  Support for health and other
    social programs
    Canada Health Transfer 3,006 3,096 3.0 15,028 15,479 3.0
    Canada Social Transfer 1,112 1,146 3.1 5,562 5,728 3.0
    Home care and mental health n/a 289 n/a n/a 289 n/a
 

    Total 4,118 4,531 10.0 20,590 21,496 4.4
  Fiscal arrangements and other transfers 1,797 1,772 -1.4 9,417 9,556 1.5
  Canada's cities and communities 0 0 n/a 1,036 1,036 0.0
  Quebec Abatement -381 -443 16.3 -1,907 -2,030 6.4
 

  Total 5,534 5,860 5.9 29,136 30,058 3.2
Direct program expenses
  Transfer payments
    Agriculture and Agri-Food Canada 96 104 8.3 302 308 2.0
    Employment and Social Development Canada 453 459 1.3 2,234 2,508 12.3
    Global Affairs Canada 175 435 148.6 1,127 1,281 13.7
    Health Canada 64 79 23.4 1,346 1,475 9.6
    Indigenous and Northern Affairs Canada 559 581 3.9 2,942 3,149 7.0
    Innovation, Science and Economic Development Canada 285 425 49.1 1,120 1,571 40.3
    Other 665 314 -52.8 4,904 3,393 -30.8
 

    Total 2,297 2,397 4.4 13,975 13,685 -2.1
  Other direct program expenses
    Consolidated Crown corporations 667 773 15.9 3,723 4,295 15.4
    National Defence 2,370 2,444 3.1 9,534 10,120 6.1
    All other departments
      and agencies
4,645 4,098 -11.8 19,693 19,805 0.6
 

    Total other direct program expenses 7,682 7,315 -4.8 32,950 34,220 3.9
 

  Total direct program expenses 9,979 9,712 -2.7 46,925 47,905 2.1
 

Total program expenses 23,388 23,335 -0.2 112,500 116,709 3.7
Public debt charges 2,196 2,014 -8.3 10,734 10,077 -6.1
 

Total expenses 25,584 25,349 -0.9 123,234 126,786 2.9

Note: Totals may not add due to rounding.

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

  2016 2017 2016–17 2017–18
Budgetary balance (deficit/surplus) -2,686 -2,587 -5,445 -2,696
Non-budgetary transactions
  Capital investment activities -421 -386 -1,182 -793
  Other investing activities -464 -842 -3,212 260
  Pension and other accounts 1,455 690 2,885 1,876
  Other activities    
    Accounts payable, receivables, accruals and allowances 1,911 2,035 -10,436 -15,636
    Foreign exchange activities -1,879 52 -3,264 3,620
    Amortization of tangible capital assets 343 331 1,555 836
 

    Total other activities 375 2,418 -12,145 -11,180
 

  Total non-budgetary transactions 945 1,880 -13,654 -9,837
 

Financial source/requirement -1,741 -707 -19,099 -12,533
Note: Totals may not add due to rounding.
 
Table 5
Financial source/requirement and net financing activities
$ millions
  August April to August
 

  2016 2017 2016–17 2017–18
Financial source/requirement -1,741 -707 -19,099 -12,533
Net increase (+)/decrease (-) in financing activities
  Unmatured debt transactions
    Canadian currency borrowings
      Marketable bonds -1,949 1,266 11,284 18,217
      Treasury bills -1,100 -4,300 12,000 300
      Retail debt 14 -28 103 -258
 

      Total -3,035 -3,062 23,387 18,259
    Foreign currency borrowings 634 324 1,092 -433
 

    Total -2,401 -2,738 24,479 17,826
    Cross-currency swap revaluation 244 10 -255 -3,415
    Unamortized discounts and premiums on market debt 31 -39 575 -634
    Obligations related to capital leases and other unmatured debt -16 -18 -123 61
 

  Net change in financing activities -2,142 -2,785 24,676 13,838
Change in cash balance -3,883 -3,492 5,577 1,305
Note: Totals may not add due to rounding.
 
Table 6
Condensed statement of assets and liabilities
$ millions
March 31,
2017
August 31,
2017
Change
Liabilities      
   Accounts payable and accrued liabilities 132,519 128,601 -3,918
   Interest-bearing debt
      Unmatured debt
         Payable in Canadian currency
            Marketable bonds 536,280 554,497 18,217
            Treasury bills 136,700 137,000 300
            Retail debt 4,533 4,275 -258
 
            Subtotal 677,513 695,772 18,259
      Payable in foreign currencies 17,609 17,176 -433
      Cross-currency swap revaluation 7,764 4,349 -3,415
      Unamortized discounts and premiums on market debt 5,322 4,688 -634
      Obligations related to capital leases and other unmatured debt 5,425 5,486 61
 
      Total unmatured debt 713,633 727,471 13,838
     Pension and other liabilities  
         Public sector pensions 151,806 151,359 -447
         Other employee and veteran future benefits 93,568 95,988 2,420
         Other liabilities 5,689 5,592 -97
 
         Total pension and other liabilities 251,063 252,939 1,876
 
      Total interest-bearing debt 964,696 980,410 15,714
 
   Total liabilities 1,097,215 1,109,011 11,796
Financial assets
   Cash and accounts receivable 158,055 171,078 13,023
   Foreign exchange accounts 98,797 95,177 -3,620
   Loans, investments, and advances (net of allowances)1 124,006 122,720 -1,286
   Public sector pension assets 1,900 1,900 0
 
   Total financial assets 382,758 390,875 8,117
 
Net debt 714,457 718,136 3,679
Non-financial assets 82,558 82,515 -43
 
Federal debt (accumulated deficit) 631,899 635,621 3,722
Note: Totals may not add due to rounding.
1 August 31, 2017 amount includes $1.0 billion in other comprehensive losses from enterprise Crown corporations and other government business enterprises for the April to August 2017 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.

October 2017