- Fiscal Monitor 2006 -

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Highlights of financial results for  February 2006

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Highlights

February 2006: budgetary surplus of $4.1 billion

There was a budgetary surplus of $4.1 billion in February 2006, down $1.7 billion from February 2005. Total budgetary revenues were $0.1 billion lower, primarily due to a $0.6-billion decline in corporate income tax revenues. This decline is primarily due to an increase in refunds to the non-energy manufacturing sector. Program expenses were up $1.6 billion, primarily reflecting higher transfer payments to the provinces and territories as specified under the 2004 agreements on health care and equalization/Territorial Formula Financing (TFF). Public debt charges were flat compared to the same month last year.

April 2005 to February 2006: budgetary surplus of $13.1 billion

For the first 11 months of the 2005–06 fiscal year (April to February), the budgetary surplus is estimated at $13.1 billion, down $5.6 billion from the $18.7-billion surplus reported in the same period of 2004–05. Budgetary revenues were up $6.4 billion or 3.6 per cent. This gain is net of the $4.7-billion cost of the personal income tax reduction measures pertaining to the 2005 tax year and the first two months of this year. Program expenses were up $12.7 billion or 9.9 per cent, primarily due to higher transfers to the provinces and territories for health care and equalization/TFF. Public debt charges were $0.7 billion lower. A full update of the fiscal projections for the year as a whole, including the year-end accrual adjustments, will be provided in the budget.

February 2006

There was a budgetary surplus of $4.1 billion in February 2006, down $1.7 billion from February 2005.

Budgetary revenues declined by $0.1 billion, or 0.5 per cent, to $19.7 billion.

  • Personal income tax receipts were up $0.3 billion or 4.7 per cent.
  • Corporate income tax revenues were down $0.6 billion or 9.6 per cent, largely due to an increase in refunds to the non-energy manufacturing sector, reflecting weak profitability in that sector in 2005. In addition, corporate year-end settlement payments were weaker than in February last year, due in part to lower settlement payments from the non-energy manufacturing sector.
  • Other income tax receipts—withholdings from non-residents—rose $59 million or 16.8 per cent in February.
  • Excise taxes and duties rose $0.2 billion or 5.0 per cent due to a $0.3-billion increase in goods and services tax (GST) revenues. Customs import duties were down $38 million, while sales and excise taxes were down $78 million. Revenues from the Air Travellers Security Charge were up $5 million.
  • Employment insurance (EI) premiums declined by 4.8 per cent, reflecting the decline in the premium rate from $1.95 to $1.87 per $100 of insurable earnings, effective January 1, 2006.
  • Other revenues, consisting of revenues from Crown corporations, sales of goods and services, return on investments, foreign exchange revenues and miscellaneous revenues, were down 3.7 per cent. Other revenues can be volatile on a monthly basis.

Program expenses in February 2006 were $12.9 billion, up $1.6 billion or 13.9 per cent from February 2005, primarily due to higher transfer payments.

Transfer payments were up $1.3 billion or 16.0 per cent.

  • Transfers to persons, consisting of elderly and EI benefits, were up $61 million or 1.6 per cent. Elderly benefits increased 5.4 per cent due to both higher average benefits, which are indexed to Consumer Price Index inflation, and an increase in the number of individuals eligible for benefits. EI benefit payments decreased 4.8 per cent, reflecting a decline in regular benefits.
  • Transfers to other levels of government, consisting of federal transfers in support of health and other social programs (Canada Health Transfer and Canada Social Transfer), fiscal transfers, transfers to provinces on behalf of Canada’s cities and communities, and Alternative Payments for Standing Programs, were up $0.8 billion or 35.3 per cent. The increase in federal transfers in support of health and other social programs and higher fiscal transfers largely reflect increased funding under the 2004 agreements on health care and equalization/TFF.
  • Subsidies and other transfers increased $0.4 billion or 21.9 per cent. This component is volatile on a monthly basis.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including National Defence, and also reflect the ongoing assessment of the Government’s liabilities. These expenses increased $0.3 billion or 9.4 per cent.

Public debt charges increased marginally, by $9 million.

April 2005 to February 2006

In the first 11 months of the 2005–06 fiscal year, there was a budgetary surplus of $13.1 billion, $5.6 billion below the $18.7-billion surplus reported in the same period of 2004–05.

Budgetary revenues increased $6.4 billion or 3.6 per cent to $185.5 billion.

 

  • Personal income tax revenues rose $3.4 billion or 4.2 per cent. This gain is net of the $4.7-billion cost of the personal income tax reduction measures pertaining to the 2005 tax year and the first two months of this year.
  • Corporate income tax revenues were up $2.2 billion or 8.4 per cent, reflecting gains in corporate profitability in 2005.
  • Other income tax revenues increased $1.1 billion or 32.9 per cent, reflecting increased dividend payments to non-residents.
  • Excise taxes and duties rose $2.1 billion or 5.1 per cent. GST revenues increased $2.1 billion or 7.2 per cent, broadly consistent with the growth rate of retail sales of 6.9 per cent over the same period. Customs import duties were up 10.3 per cent. Sales and excise taxes were down 2.8 per cent, while the Air Travellers Security Charge was down 11.2 per cent, reflecting reductions in the charge, effective April 1, 2005.
  • EI premiums were down 2.0 per cent, as the impact of the reduction in the premium rate in January 2005 and January 2006 more than offset the impact of higher employment and wages and salaries.
  • Other revenues were down $2.0 billion or 15.1 per cent, reflecting the impact of the one-time gain ($2.6 billion) from the sale of the Government’s remaining shares in Petro-Canada in September 2004.

Revenues and expenses

Program expenses in the April 2005 to February 2006 period were $141.7 billion, up $12.7 billion or 9.9 per cent from the same period of 2004–05, primarily due to higher transfers to the provinces and territories for health care and equalization/TFF. Public debt charges declined by $0.7 billion.

Transfer payments, which account for nearly two-thirds of total program expenses, increased $10.0 billion or 12.2 per cent.

  • Transfers to persons advanced by 2.0 per cent. Elderly benefits were up 4.4 per cent while EI benefits were down 2.5 per cent. The year-to-date decline in EI benefits is mainly attributable to a decline in regular benefits, which is in turn due to improved labour market conditions compared to the same period in 2004–05.
  • Transfers to other levels of government were up $6.8 billion or 24.5 per cent, reflecting the impact of the 2004 agreements on health care and the new framework for equalization and TFF.
  • Subsidies and other transfers increased 15.6 per cent, reflecting the impact of measures from recent budgets as well as transfers under the Grains and Oilseeds Payment Program and the Energy Cost Benefit.

Budgetary balance

Other program expenses increased 5.8 per cent.

Public debt charges were down 2.3 per cent compared to the same period last year, due to a decline in the stock of interest-bearing debt and a decline in the average effective interest rate on that debt.

Federal debt

Financial source of $5.4 billion for April 2005 to February 2006

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 $7.6 billion in the April-to-February period, down $2.6 billion from the requirement in the same period of 2004–05.

With a budgetary surplus of $13.1 billion and a net requirement of $7.6 billion from non-budgetary transactions, there was a financial source of $5.4 billion in the first 11 months of 2005–06 compared to a financial source of $8.5 billion in the same period of 2004–05.

Net financing activities down $18.5 billion

The Government used this financial source of $5.4 billion and a reduction in its cash balances of $13.1 billion to reduce its market debt by $18.5 billion by the end of February 2006, largely through a reduction 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 February stood at $4.0 billion.

Table 1
Summary statement of transactions

  February April to February
 

  2005 2006 2004–05 2005–06
  ($ millions)
Budgetary transactions        
  Revenues 19,840 19,743 179,044 185,456
  Expenses        
    Program expenses -11,348 -12,928 -128,936 -141,658
    Public debt charges -2,722 -2,731 -31,436 -30,717
 

  Budgetary balance (deficit/surplus) 5,770 4,084 18,672 13,081
Non-budgetary transactions -5,198 -2,416 -10,212 -7,638
Financial source/requirement 572 1,668 8,460 5,443
Net change in financing activities 3,221 -348 -18,437 -18,513
Net change in cash balances 3,793 1,320 -9,977 -13,070
Cash balance at end of period     7,273 4,048
Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues

  February   April to February  
 
 
 
  2005 2006 Change 2004–05 2005–06 Change
  ($ millions)   (%) ($ millions) (%)
Tax revenues            
  Income taxes            
    Personal income tax 7,372 7,717 4.7 80,474 83,825 4.2
    Corporate income tax 5,780 5,225 -9.6 25,635 27,799 8.4
    Other income tax revenue 352 411 16.8 3,251 4,321 32.9
 

    Total income tax 13,504 13,353 -1.1 109,360 115,945 6.0
  Excise taxes and duties            
    Goods and services tax 2,542 2,830 11.3 29,221 31,333 7.2
    Customs import duties 275 237 -13.8 2,785 3,073 10.3
    Sales and excise taxes 723 645 -10.8 8,878 8,626 -2.8
    Air Travellers Security Charge 31 36 16.1 356 316 -11.2
 

    Total excise taxes and duties 3,571 3,748 5.0 41,240 43,348 5.1
 

  Total tax revenues 17,075 17,101 0.2 150,600 159,293 5.8
Employment insurance premiums 1,797 1,710 -4.8 15,401 15,091 -2.0
Other revenues 968 932 -3.7 13,043 11,072 -15.1
Total budgetary revenues 19,840 19,743 -0.5 179,044 185,456 3.6
Note: Totals may not sum due to rounding.

Table 3
Budgetary expenses

  February   April to February  
 
 
 
  2005 2006 Change 2004–05 2005–06 Change
  ($ millions) (%) ($ millions) (%)
Transfer payments            
  Transfers to persons            
    Elderly benefits 2,367 2,496 5.4 25,561 26,680 4.4
    Employment insurance benefits 1,423 1,355 -4.8 13,405 13,069 -2.5
 

    Total 3,790 3,851 1.6 38,966 39,749 2.0
  Transfers to other levels of government            
    Support for health and other social programs            
      Canada Health Transfer 1,054 1,583 50.2 11,596 17,417 50.2
      Canada Social Transfer 652 685 5.1 7,173 7,540 5.1
      Health Reform Transfer 125 0 n/a 1,375 0 n/a
 

    Total 1,831 2,268 23.9 20,144 24,957 23.9
    Fiscal transfers 634 1,045 64.8 10,020 11,641 16.2
    Canada’s cities and communities 0 0 n/a 0 670 n/a
    Alternative Payments for Standing Programs -210 -261 24.3 -2,413 -2,722 12.8
 

    Total 2,255 3,052 35.3 27,751 34,546 24.5
  Subsidies and other transfers            
    Agriculture 780 720 -7.7 1,606 2,414 50.3
    Foreign Affairs 200 238 19.0 2,210 2,171 -1.8
    Health 124 86 -30.6 1,618 1,633 0.9
    Human Resources Development 104 124 19.2 1,154 1,268 9.9
    Indian and Northern Development 285 278 -2.5 3,903 4,263 9.2
    Industry and Regional Development -16 168 n/a 1,475 1,778 20.5
    Other 313 568 81.5 3,582 4,439 23.9
 

    Total 1,790 2,182 21.9 15,548 17,966 15.6
 

  Total transfer payments 7,835 9,085 16.0 82,265 92,261 12.2
Other program expenses            
  Crown corporation expenses            
    Canadian Broadcasting Corporation 65 69 6.2 1,037 1,098 5.9
    Canada Mortgage and Housing Corporation 170 150 -11.8 1,855 1,857 0.1
    Other 107 188 75.7 1,838 1,698 -7.6
 

    Total 342 407 19.0 4,730 4,653 -1.6
  Defence 1,024 1,183 15.5 11,929 13,170 10.4
 

  All other departments and agencies 2,147 2,253 4.9 30,012 31,574 5.2
  Total other program expenses 3,513 3,843 9.4 46,671 49,397 5.8
Total program expenses 11,348 12,928 13.9 128,936 141,658 9.9
Public debt charges 2,722 2,731 0.3 31,436 30,717 -2.3
Total budgetary expenses 14,070 15,659 11.3 160,372 172,375 7.5
Note: Totals may not sum due to rounding.

Table 4
Budgetary balance and financial source/requirement

  February April to February
 

  2005 2006 2004–05 2005–06
  ($ millions)
Budgetary balance (deficit/surplus) 5,770 4,084 18,672 13,081
Non-budgetary transactions        
  Capital investing activities -313 -294 -1,402 -2,108
  Other investing activities -101 -670 -2,015 -3,129
  Pension and other accounts -934 -262 -2,907 -363
  Other activities        
    Accounts payable, receivables, 
     accruals and allowances
-2,930 -1,404 -8,629 -7,397
    Foreign exchange activities -1,166 15 1,925 2,611
    Amortization of tangible capital assets 246 199 2,816 2,748
 

    Total other activities -3,850 -1,190 -3,888 -2,038
  Total non-budgetary transactions -5,198 -2,416 -10,212 -7,638
Net financial source/requirement 572 1,668 8,460 5,443
Note: Totals may not sum due to rounding.

Table 5
Financial source/requirement and net financing activities

  February April to February
 

  2005 2006 2004–05 2005–06
  ($ millions)
Net financial source/requirement 572 1,668 8,460 5,443
Net increase (+)/decrease 
 (-) in financing activities
       
  Unmatured debt transactions        
    Canadian currency borrowings        
      Marketable bonds 1,887 2,245 -13,636 -5,526
      Treasury bills 1,100 -2,100 2,300 -7,300
      Canada Savings Bonds -196 -137 -2,161 -1,609
      Other -1 0 -29 -223
 

      Total 2,790 8 -13,526 -14,658
    Foreign currency borrowings 397 -361 -5,076 -3,920
 

      Total 3,187 -353 -18,602 -18,578
    Obligations related to capital leases 34 5 165 65
  Net change in financing activities 3,221 -348 -18,437 -18,513
Change in cash balance 3,793 1,320 -9,977 -13,070
Note: Totals may not sum due to rounding.

Table 6
Condensed statement of assets and liabilities

  March 31, 2005 February 28, 2006 Change
  ($ millions)
Liabilities      
  Accounts payable, accruals and allowances 90,473 89,251 -1,222
  Interest-bearing debt      
    Unmatured debt      
      Payable in Canadian dollars      
        Marketable bonds 266,570 261,044 -5,526
        Treasury bills 127,199 119,899 -7,300
        Canada Savings Bonds 19,080 17,471 -1,609
        Other 3,393 3,170 -223
 
        Subtotal 416,242 401,584 -14,658
      Payable in foreign currencies 16,286 12,366 -3,920
      Obligations related to capital leases 2,932 2,997 65
 
      Total unmatured debt 435,460 416,947 -18,513
    Pension and other accounts      
      Public sector pensions 129,579 131,407 1,828
      Other employee and veteran future benefits 41,549 42,982 1,433
      Other pension and other accounts 8,680 5,056 -3,624
 
      Total pension and other accounts 179,808 179,445 -363
    Total interest-bearing debt 615,268 596,392 -18,876
  Total liabilities 705,741 685,643 -20,098
Financial assets      
  Cash and accounts receivable 76,281 69,386 -6,895
  Foreign exchange accounts 40,871 38,260 -2,611
  Loans, investments and advances 
   (net of allowances)
33,860 36,989 3,129
 
  Total financial assets 151,012 144,635 -6,377
 
Net debt 554,729 541,008 -13,721
Non-financial assets 54,866 54,226 -640
Federal debt (accumulated deficit) 499,863 486,782 -13,081

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