- Fiscal Monitor 2004 -

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Highlights of financial results for
August 2004

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Highlights

August 2004: budgetary surplus of $306 million

There was a budgetary surplus of $306 million in August 2004, up slightly from the surplus of $103 million recorded in August 2003. Revenues were up $0.7 billion compared to August 2003, while program expenses were up $0.6 billion. Public debt charges were $0.1 billion lower than during the same month last year.

April to August 2004: budgetary surplus of $4.7 billion

For the first five months of the 2004–05 fiscal year (April to August), the budgetary surplus is estimated at $4.7 billion, up $0.9 billion from the surplus reported in the same period last year. Budgetary revenues were up $2.6 billion, or 3.6 per cent, reflecting gains in most major components, consistent with the strong growth in the economy in the first half of 2004. Program expenses were up $2.1 billion, or 3.8 per cent, primarily due to higher transfer payments, reflecting the impact of previous budget measures. Public debt charges were $0.3 billion lower.

August 2004: budgetary results

The August 2004 budgetary surplus is estimated at $306 million, up from $103 million in August 2003.

On a year-over-year basis, budgetary revenues, at $14.6 billion, were up $0.7 billion, or 4.9 per cent. This increase is primarily attributable to a $0.6-billion increase in personal income tax revenues and a $0.4-billion increase in excise taxes and duties, offset somewhat by declines in employment insurance premium revenues and other revenues.

  • Personal income tax revenues increased by $0.6 billion, or 10.1 per cent, primarily due to strong growth in source deductions.
  • Corporate income tax revenues were up 3.8 per cent, as strong gains in monthly installments were partially offset by an increase in refunds related to prior taxation years.
  • Excise taxes and duties increased by $0.4 billion, or 9.8 per cent. This increase reflects strong growth in goods and services tax (GST) revenues, somewhat offset by declines in customs import duties and sales and excise taxes. GST revenues increased $0.6 billion, or about 27 per cent, due to similar growth in gross receipts from both domestic sales and customs. Customs import duties were 11.5 per cent lower due in part to an increase in refunds. Sales and excise taxes declined 21.1 per cent, partly reflecting the ongoing effect of higher energy prices on energy demand. Other excise and sales taxes were generally lower than last year.
  • Employment insurance (EI) premiums were down 11.3 per cent, as the reduction in premium rates (the employee rate for 2004 is $1.98 per $100 of insurable earnings compared to $2.10 in 2003) more than offset the increase in employment and thus the number of people paying premiums.
  • Other revenues, which consist of revenues from Crown corporations, sales of goods and services and foreign exchange revenues, declined 17.7 per cent. This component is extremely volatile on a monthly basis.

On a year-over-year basis, program expenses in August 2004 were $11.4 billion, up $0.6 billion, or 5.5 per cent, from August 2003. Higher EI benefits and equalization entitlements accounted for most of the increase.

Transfer payments were up $0.5 billion, or 6.9 per cent.

  • Major transfers to persons, consisting of elderly and EI benefits, were up strongly on a year-over-year basis. Elderly benefits increased 3.4 per cent due to both higher average benefits, which have risen because of higher inflation in early 2003, and an increase in the number of individuals eligible for benefits. EI benefit payments increased 23.5 per cent, reflecting the timing of payments in August 2004 compared to the same month in 2003. Some of this increase should be reversed in September 2004.
  • Major transfers to other levels of government, consisting of federal transfers in support of health and other social programs (the Canada Health Transfer, Canada Social Transfer and Health Reform Transfer), fiscal transfers and Alternative Payments for Standing Programs, were up $0.3 billion, or 11.6 per cent. The increase in federal transfers in support of health and other social programs reflects increased funding under the February 2003 First Ministers’ Accord on Health Care Renewal. Fiscal transfers consist of equalization entitlements, payments to the territorial governments, statutory subsidies and recoveries under the Youth Allowance Recovery Program. In aggregate, these transfers were up 17.5 per cent from August 2003, primarily reflecting the impact of recoveries in 2003–04 of overpayments in previous years.
  • Subsidies and other transfers were down 11.6 per cent. This component is extremely volatile on a monthly basis, reflecting the timing of payments. Negative amounts in Agriculture and Human Resources Development for August 2004 reflect corrections to estimates for previous months.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including defence. On a year-over-year basis, these expenses were up 3.3 per cent, as a decline in Crown corporation and defence-related expenses was more than offset by higher expenses in all other departments and agencies. This component is also quite volatile on a monthly basis, reflecting the timing of payments and the coming into force of budget measures.

Public debt charges were down 4.0 per cent, as a lower stock of interest-bearing debt more than offset the impact of an increase in the average effective interest rate on that debt.

April to August 2004: budgetary results

In the first five months of the fiscal year, there was a budgetary surplus of $4.7 billion, up $0.9 billion from the surplus of $3.8 billion reported in the same period of 2003–04.

Budgetary revenues, at $76.2 billion, were up $2.6 billion, or 3.6 per cent, reflecting strong gains in most components of tax revenue, dampened slightly by lower EI premiums and other revenues. Tax revenues were up 6.6 per cent.

  • Personal income tax revenues increased by $1.9 billion, or 5.6 per cent, primarily due to strong growth in source deductions from employment income, reflecting, in part, gains in employment.
  • Corporate income tax revenues were up $0.6 billion, or 8.0 per cent, consistent with ongoing strength in corporate profits.
  • Excise taxes and duties increased by $1.3 billion, or 7.7 per cent, primarily due to growth in GST revenues, which were up 11.2 per cent. Customs import duties were also up, partially offset by declines in sales and excise taxes and revenues related to the Air Travellers Security Charge.
  • EI premiums were down $0.6 billion, or 7.4 per cent.
  • Other revenues declined 12.7 per cent.

Revenues and Expenses

On a year-over-year basis, program expenses in the April to August 2004 period, at $57.0 billion, were up 3.8 per cent over the same period of 2003–04, with most of the increase attributable to higher transfer payments. Public debt charges were $0.3 billion lower than in the first five months of 2003–04.

Transfer payments, which accounted for nearly two-thirds of total program expenses, increased by $1.9 billion, or 5.4 per cent.

  • Transfers to persons advanced by $0.6 billion, or 3.6 per cent. Elderly benefits were up 3.2 per cent while EI benefits were up 4.3 per cent. Within EI benefits, most of the increase was in special benefits, such as sickness, maternity and parental benefits.
  • Transfers to other levels of government were up $0.9 billion, or 7.5 per cent, reflecting higher transfers in support of health and other social programs due to the 2003 health accord, and increased fiscal transfers. The latter primarily reflects the impact on the 2003–04 results of recoveries related to overpayments in previous years under the equalization program.
  • Subsidies and other transfers increased by $0.4 billion, or 6.5 per cent, primarily reflecting the impact of previous budget measures.

Other program expenses increased by $0.2 billion, or 1.2 per cent, as lower expenses related to Crown corporations and defence were offset by an increase in all other departmental and agency expenses.

Public debt charges were down $0.3 billion, reflecting the impact of a decline in the stock of interest-bearing debt.

Budgetary balance

 

Federal debt (accumulated deficit)

Financial requirement of $4.1 billion for April to August 2004

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable 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.

Non-budgetary transactions resulted in a net requirement of $8.8 billion in the April to August period, down $6.9 billion from the requirement in the same period of 2003–04. The decline is primarily attributable to the cash transfers in the April to August 2003 period to trust funds established in the 2003 budget for the Canada Health and Social Transfer cash supplement ($2.5 billion), the Diagnostic/Medical Equipment Fund ($1.5 billion), Canada Health Infoway ($600 million) and the Canada Foundation for Innovation ($500  million).

With a budgetary surplus of $4.7 billion and a net requirement of $8.8  billion from non-budgetary transactions, there was a financial requirement of $4.1 billion in the first five months of 2004–05, down $7.8 billion from the same period last year.

Net financing activities down $4.1 billion

The Government reduced market debt by $4.1 billion by the end of August 2004, largely by reducing its holdings of marketable bonds. As a result, to finance both the reduction in market debt and the financial requirement of $4.1 billion, the Government lowered its cash balances by $8.3 billion. The monthly level of cash balances varies as a result of 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 stood at $9.0 billion.

Table 1
Summary statement of transactions


  August April to August
 

  2003 2004 2003–04 2004–05

  ($ millions)
Budgetary transactions        
Revenues 13,935 14,617 73,571 76,214
Expenses        
   Program expenses -10,799 -11,398 -54,854 -56,949
   Public debt charges -3,033 -2,913 -14,947 -14,609
 

Budgetary balance (deficit/surplus) 103 306 3,770 4,656
Non-budgetary transactions -287 1,407 -15,711 -8,802
Financial source/requirement -184 1,713 -11,941 -4,146
Net change in financing activities 5,123 2,856 5,580 -4,111
Net change in cash balances 4,939 4,569 -6,361 -8,257
Cash balance at end of period     8,336 8,994

Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues


  August   April to August  
 
 
 
  2003 2004 Change 2003–04 2004–05 Change

  ($ millions)

(%)

($ millions)

(%)

Tax revenues            
Income taxes            
   Personal income tax 6,428 7,076 10.1 33,472 35,340 5.6
   Corporate income tax 936 972 3.8 7,936 8,572 8.0
   Other income tax revenue 197 218 10.7 1,179 1,319 11.9
 

   Total income tax 7,561 8,266 9.3 42,587 45,231 6.2
Excise taxes and duties          
   Goods and services tax 2,290 2,906 26.9 11,620 12,919 11.2
   Customs import duties 349 309 -11.5 1,228 1,304 6.2
   Sales and excise taxes 1,010 797 -21.1 4,080 4,047 -0.8
   Air Travellers Security Charge 32 28 -12.5 179 159 -11.2
 

   Total excise taxes and duties 3,681 4,040 9.8 17,107 18,429 7.7
 

Total tax revenues 11,242 12,306 9.5 59,694 63,660 6.6
Employment insurance premiums 1,475 1,309 -11.3 8,368 7,746 -7.4
Other revenues 1,218 1,002 -17.7 5,509 4,808 -12.7
Total budgetary revenues 13,935 14,617 4.9 73,571 76,214 3.6

Table 3
Budgetary expenses


  August   April to August  
 
 
 
  2003 2004 Change 2003–04 2004–05 Change

  ($ millions)

(%)

($ millions)

(%)

Transfer payments            
Transfers to persons            
   Elderly benefits 2,233 2,310 3.4 11,080 11,437 3.2
   Employment insurance benefits 1,075 1,328 23.5 5,682 5,925 4.3
 

   Total 3,308 3,638 10.0 16,762 17,362 3.6
Transfers to other levels
  of government
           
   Support for health and other
     social programs
           
      Canada Health Transfer   1,054     5,271  
      Canada Social Transfer   652     3,260  
      Health Reform Transfer   125     625  
      Canada Health and
        Social Transfer
1,692     8,458 25  
 

      Total 1,692 1,831 8.2 8,458 9,181 8.5
   Fiscal transfers 789 927 17.5 4,344 4,717 8.6
   Alternative Payments for
     Standing Programs
-211 -225 6.6 -995 -1,209 21.5
 

   Total 2,270 2,533 11.6 11,807 12,689 7.5
Subsidies and other transfers          
   Agriculture 211 -8 -103.8 257 145 -43.6
   Foreign Affairs 104 167 60.6 697 894 28.3
   Health 99 87 -12.1 616 695 12.8
   Human Resources Development 80 -95 -218.8 507 397 -21.7
   Indian and Northern
     Development
313 337 7.7 1,877 1,889 0.6
   Industry and Regional
     Development
187 211 12.8 643 705 9.6
   Other 116 282 143.1 1,120 1,366 22.0
 

   Total 1,110 981 -11.6 5,717 6,091 6.5
 

Total transfer payments 6,688 7,152 6.9 34,286 36,142 5.4
Other program expenses            
Crown corporation expenses            
   Canadian Broadcasting
     Corporation
74 85 14.9 491 551 12.2
   Canada Mortgage and
     Housing Corporation
172 140 -18.6 909 865 -4.8
   Other 178 178 0.0 915 872 -4.7
 

   Total 424 403 -5.0 2,315 2,288 -1.2
Defence 1,117 1,047 -6.3 4,692 4,615 -1.6
All other departments
  and agencies
2,570 2,796 8.8 13,561 13,904 2.5
 

Total other program expenses 4,111 4,246 3.3 20,568 20,807 1.2
Total program expenses 10,799 11,398 5.5 54,854 56,949 3.8
Public debt charges 3,033 2,913 -4.0 14,947 14,609 -2.3
Total budgetary expenses 13,832 14,311 3.5 69,801 71,558 2.5

Table 4
Budgetary balance and financial source/requirement


  August April to August
 

  2003 2004 2003–04 2004–05

 

($ millions)

Budgetary balance (deficit/surplus) 103 306 3,770 4,656
Non-budgetary transactions        
Capital investing activities -135 -27 -771 -406
Other investing activities -129 -272 -529 -704
Pension and other accounts 111 104 192 -513
Other activities        
   Accounts payable, receivables, accruals and allowances -631 1,878 -16,512 -8,188
   Foreign exchange activities -25 -427 387 -148
   Amortization of tangible capital assets 522 151 1,522 1,157
 

   Total other activities -134 1,602 -14,603 -7,179
   Total non-budgetary transactions -287 1,407 -15,711 -8,802
Net financial source/requirement -184 1,713 -11,941 -4,146

Table 5
Financial source/requirement and net financing activities


  August April to August
 

  2003 2004 2003–04 2004–05

  ($ millions)
Net financial source/requirement

-184

1,713

-11,941

-4,146

Net increase (+)/decrease (-) 
  in financing activities
       
Unmatured debt transactions        
   Canadian currency borrowings        
   Marketable bonds 1,451 2,767 -3,343 -4,665
      Treasury bills 3,900 100 9,700 1,900
      Canada Savings Bonds -89 -55 -578 -238
      Other -1 -5 174 -24
 

      Total 5,261 2,807 5,953 -3,027
   Foreign currency borrowings -138 49 -373 -1,084
 

   Net change in financing activities 5,123 2,856 5,580 -4,111
Change in cash balance 4,939 4,569 -6,361 -8,257

Table 6
Condensed statement of assets and liabilities


  March 31, 2004 August 31, 2004 Change

  ($ millions)
Liabilities      
Accounts payable, accruals
and allowances
79,964 67,758 -12,206
Interest-bearing debt      
   Unmatured debt      
      Payable in Canadian dollars      
         Marketable bonds 278,780 274,115 -4,665
         Treasury bills 113,378 115,278 1,900
         Canada Savings Bonds 21,330 21,092 -238
         Other 3,427 3,404 -23
 
         Subtotal 416,915 413,889 -3,026
      Payable in foreign currencies 20,542 19,458 -1,084
      Obligations related to capital leases 2,774 2,740 -34
 
      Total unmatured debt 440,231 436,087 -4,144
   Pension and other accounts      
      Public sector pensions 127,560 128,330 770
      Other employee and veteran
        future benefits
39,367 39,710 343
      Canada Pension Plan
        (net of securities)
7,483 6,677 -806
      Other pension and
        other accounts
6,488 6,045 -443
 
      Total pension and
        other accounts
180,898 180,761 -137
   Total interest-bearing debt 621,129 616,848 -4,281
   Total liabilities 701,093 684,606 -16,487
Financial assets      
Cash and accounts receivable 70,921 59,107 -11,814
Foreign exchange accounts 44,313 44,460 147
Loans, investments and advances
(net of allowances)
29,548 30,252 704
 
Total financial assets 144,782 133,819 -10,963
 
Net debt 556,311 550,787 -5,524
Non-financial assets 54,817 53,949 -868
Federal debt
(accumulated deficit)
501,494 496,838 -4,656