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- Fiscal Monitor 2002 -
The Fiscal Monitor
Highlights of financial results for March 2002
Highlights
March 2002: budgetary deficit of $4.9 billion
There was a budgetary deficit of $4.9 billion in March
2002, up $2.4 billion from the deficit of $2.5 billion reported
in March 2001. The year-over-year increase primarily reflects the
impact of the timing of receipts and payments between February
and March, which served to overstate the February 2002 surplus. On
a year-over-year basis budgetary revenues were $1.3 billion
lower, primarily reflecting the timing of corporate income tax
revenues, while program spending was $1.9 billion higher, attributable
in part to the timing of employment insurance (EI) benefits.
Public debt charges declined by $0.8 billion.
April 2001 to March 2002: budgetary surplus of $9.8 billion
The budgetary surplus was estimated at $9.8 billion for the April 2001 to March 2002 period, down $10.3 billion from the surplus of $20.1 billion reported in the same period of 2000-01. The lower surplus to date reflects the ongoing impact of the tax cuts and spending initiatives in the February 2000 budget and October 2000 Economic Statement and Budget Update, as well as those announced before and in the December 2001 budget. In addition, the slowdown in the economy in 2001 had an impact on most of the major revenue components and EI benefits, thereby adversely affecting the overall fiscal results, compared to the same period of 2000-01.
These are not the final results for the 2001-02 fiscal year. Still to come are the regular end-of-year accounting adjustments. Consistent with government accounting principles, these adjustments incorporate increases in program spending to include the costs of liabilities incurred during the fiscal year for which no payments were made in 2001-02. For example, the final audited outcome for 2000-01 was $17.1 billion, while the surplus to the end of March 2001 was $20.1 billion. The end-of-year accounting adjustments could be somewhat larger this year than in previous years as the monthly profile of program spending reflects the implementation of the new Financial Information Strategy, with a larger portion of spending likely being recorded at the end of the fiscal year than previously.
The results to date are somewhat better than expected at the time of the December 2001 budget, reflecting the better-than-expected economic performance in the fourth quarter of 2001, which continued into the first quarter of 2002. | March 2002: budgetary results Budgetary revenues declined $1.3 billion, or 9.4 per
cent, on a year-over-year basis. All major components recorded declines,
with the exception of personal income tax revenues.
- Personal income tax revenues were $0.1 billion, or 1.8
per cent, higher, primarily reflecting ongoing strength in monthly
deductions from employment income, offset in part by higher refunds
pertaining to the 2001 taxation year and increased payments under the
Canada Child Tax Benefit reflecting previous budget initiatives.
- Corporate income tax revenues were down
$1.1 billion, or 45.8 per cent. Although February is the settlement
period for corporations whose taxation year ends December 31, some
payments slip into early March. In February and March revenues were down
$2.3 billion compared to the same period last year, reflecting lower
corporate profits in 2001 than in 2000.
- EI premium revenues declined 3.5 per cent, reflecting
the impact of lower premium rates (the employee rate for 2002 is $2.20 per
$100 of insurable earnings compared to $2.25 in 2001).
- Excise taxes and duties declined $0.1 billion, or 2.5
per cent. This primarily reflects the timing of receipts, as February 2002
revenues were up 17.2 per cent on a year-over-year basis. Declines were
reported in all components, with the exception of sales and excise taxes.
The increase in this component was attributable to higher federal taxes on
tobacco products effective November 2, 2001.
- Non-tax revenues declined 7.1 per cent, again largely
due to the timing of receipts, as February 2002 revenues were up 13.3 per
cent on a year-over-year basis.
Program spending was up $1.9 billion, or 16.0 per cent, on a year-over-year basis.
- Transfers to persons increased by $0.5 billion, or
17.8 per cent. EI benefit payments increased 43.6 per cent, in part due to
the timing of payments between February and March. In February 2002
benefits were up only 7.3 per cent – the first time the rate
of increase had been below double-digit increases since May 2001.
- Transfers to other levels of government were
up $0.1 billion, or 5.3 per cent. The increase in the Canada Health
and Social Transfer (CHST) reflects the September 2000 agreement reached
by first ministers to increase base funding from $13.5 billion in
2000-01 to $17.3 billion in 2001-02.
- Direct program spending, consisting of total program
spending less transfers to persons and other levels of government,
increased $1.3 billion, or 17.9 per cent. The increase primarily
reflects the impact of the implementation of the Financial Information
Strategy, with a larger portion of spending being recorded at the end of
the fiscal year than in previous years.
Public debt charges, on a year-over year basis, were down $0.8 billion, or 22.6 per cent, primarily reflecting adjustments related to previous months.
Table 1 Summary statement of transactions
|
|
March |
April to March |
|
2001 |
2002 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
13,277 |
12,024 |
177,006 |
174,130 |
Program spending |
-12,201 |
-14,150 |
-115,542 |
-125,643 |
|
|
Operating surplus |
1,076 |
-2,126 |
61,464 |
48,487 |
Public debt charges |
-3,564 |
-2,757 |
-41,412 |
-38,709 |
|
|
Budgetary balance (deficit/surplus) |
-2,488 |
-4,883 |
20,052 |
9,778 |
Non-budgetary transactions |
6,317 |
7,327 |
-485 |
-3,969 |
Financial requirements/source (excluding foreign exchange transactions) |
3,829 |
2,444 |
19,567 |
5,809 |
Foreign exchange transactions |
-4,716 |
-732 |
-8,654 |
-1,849 |
|
|
Net financial balance |
-887 |
1,712 |
10,913 |
3,960 |
Net change in borrowings |
582 |
267 |
-10,682 |
-5,189 |
Net change in cash balances |
-305 |
1,979 |
231 |
-1,229 |
Cash balance at end of period |
|
|
13,179 |
11,950 |
|
Note: Positive numbers indicate a net source of funds.
Negative numbers indicate a net requirement for funds. |
Table 2 Budgetary revenues
|
|
March |
|
April to March |
|
|
2001 |
2002 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%)
|
($ millions) |
(%)
|
Income taxes |
|
|
|
|
|
|
Personal income tax |
4,546 |
4,628 |
1.8 |
81,350 |
81,760 |
0.5 |
Corporate income tax |
2,349 |
1,272 |
-45.8 |
27,619 |
24,637 |
-10.8 |
Other income tax revenue |
692 |
655 |
-5.3 |
4,216 |
4,038 |
-4.2 |
|
|
Total income tax |
7,587 |
6,555 |
-13.6 |
113,185 |
110,435 |
-2.4 |
Employment insurance premium revenues |
1,839 |
1,774 |
-3.5 |
18,732 |
17,960 |
-4.1 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
1,619 |
1,582 |
-2.3 |
24,812 |
25,275 |
1.9 |
Customs import duties |
274 |
220 |
-19.7 |
2,791 |
2,979 |
6.7 |
Sales and excise taxes |
674 |
700 |
3.9 |
8,224 |
8,641 |
5.1 |
|
|
Total excise taxes and duties |
2,567 |
2,502 |
-2.5 |
35,827 |
36,895 |
3.0 |
|
|
Total tax revenues |
11,993 |
10,831 |
-9.7 |
167,744 |
165,290 |
-1.5 |
Non-tax revenues |
1,284 |
1,193 |
-7.1 |
9,262 |
8,840 |
-4.6 |
|
|
Total budgetary revenues |
13,277 |
12,024 |
-9.4 |
177,006 |
174,130 |
-1.6 |
|
April 2001 to March 2002: budgetary results
Over the April 2001 to March 2002 period the budgetary surplus was estimated at $9.8 billion, down $10.3 billion from the surplus of $20.1 billion reported in the same period of 2000-01. Program spending was up $10.1 billion while budgetary revenues were down $2.9 billion. Dampening the impact of these factors on the budgetary balance were lower public debt charges, down $2.7 billion.
Among the major components of budgetary revenues, on a year-over-year basis:
- Personal income tax collections were marginally
higher, as higher final tax payments received in April and May 2001 with
respect to the 2000 taxation year, prior-year adjustments affecting the
October 2000 results, and an increase in assessed income subject to
taxation due to higher employment and average wages in 2001 were
largely offset by the impact of the tax reduction measures announced
in the February 2000 budget, the October 2000 Economic Statement and
Budget Update and previous budgets.
- Corporate income tax revenues declined
$3.0 billion, or 10.8 per cent, reflecting the impact of both lower
corporate profits and reductions in tax rates.
- EI premium revenues were down 4.1 per cent, as
prior-year adjustments affecting the October 2000 results and the
decline in premium rates more than offset the impact of the growth in the
number of people employed and therefore paying premiums.
- Excise taxes and duties increased 3.0 per cent. Goods
and services tax revenues were up 1.9 per cent, broadly in line with
the increase in domestic demand, customs import duties were up 6.7
per cent and sales and excise taxes increased 5.1 per cent, the latter
primarily reflecting the impact of higher tobacco excise taxes.
- Non-tax revenues were down 4.6 per cent, primarily
reflecting the impact of lower interest rates.
Among the major components of program spending, on a year-over-year basis:
- Transfers to persons were up 6.9 per cent due
to higher elderly and EI benefit payments. The increase in
elderly benefit payments reflects an increase in the number of
individuals eligible for benefits and higher average benefits, which
are indexed to inflation. The increase in EI benefit payments primarily
reflects the impact of program enhancements, as well as an increase
in the number of beneficiaries. The net impact of these increases was
dampened by the Relief for Heating Expenses paid in January 2001.
- Transfers to other levels of government were up 10.5
per cent, reflecting higher cash transfers under the CHST. The increase in
the CHST reflects the September 2000 agreement reached by first ministers
to increase base funding from $13.5 billion in 2000-01 to
$17.3 billion in 2001-02. The overall growth in this component was
dampened by the special payment of $1 billion to the Medical
Equipment Fund in 2000-01 and by a decline in fiscal transfers due to the
recording in 2000-01 of the liability for lifting the equalization ceiling
in 1999-2000.
- Direct program spending increased 9.2 per cent. This
reflects in large part the initiatives announced in the December 2001
budget, notably the measures to enhance personal and economic security.
The year-over-year decline in public debt charges of $2.7 billion reflects the impact of declines in both the stock of interest-bearing debt and the average effective interest rate on that debt.
Table 3 Budgetary expenditures
|
|
March |
|
April to March |
|
|
2001 |
2002 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%)
|
($ millions) |
(%)
|
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
2,057 |
2,157 |
4.9 |
24,245 |
25,364 |
4.6 |
Employment insurance benefits |
1,030 |
1,479 |
43.6 |
10,999 |
13,852 |
25.9 |
Relief for Heating Expenses |
|
|
|
1,434 |
|
|
|
|
Total |
3,087 |
3,636 |
17.8 |
36,678 |
39,216 |
6.9 |
Other levels of government |
|
|
|
|
|
|
Canada Health and Social
Transfer |
1,125 |
1,442 |
28.2 |
13,500 |
17,300 |
28.1 |
Fiscal transfers |
907 |
713 |
-21.4 |
12,303 |
12,146 |
-1.3 |
Medical Equipment Fund |
|
|
|
1,000 |
|
|
Alternative Payments for
Standing Programs |
-206 |
-232 |
12.6 |
-2,466 |
-2,563 |
3.9 |
|
|
Total |
1,826 |
1,923 |
5.3 |
24,337 |
26,883 |
10.5 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
633 |
584 |
-7.7 |
1,232 |
1,298 |
5.4 |
Foreign Affairs |
291 |
566 |
94.5 |
1,713 |
2,131 |
24.4 |
Health |
97 |
317 |
226.8 |
1,107 |
1,486 |
34.2 |
Human Resources Development |
363 |
165 |
-54.5 |
1,685 |
1,711 |
1.5 |
Indian and Northern
Development |
144 |
345 |
139.6 |
3,886 |
3,944 |
1.5 |
Industry and Regional
Development |
407 |
836 |
105.4 |
1,720 |
2,157 |
25.4 |
Veterans Affairs |
125 |
144 |
15.2 |
1,458 |
1,547 |
6.1 |
Other |
652 |
586 |
-10.1 |
2,635 |
3,009 |
14.2 |
|
|
Total |
2,712 |
3,543 |
30.6 |
15,436 |
17,283 |
12.0 |
Payments to Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting
Corporation |
43 |
15 |
-65.1 |
902 |
981 |
8.8 |
Canada Mortgage and
Housing Corporation |
320 |
168 |
-47.5 |
1,990 |
1,923 |
-3.4 |
Other |
91 |
188 |
106.6 |
1,383 |
1,667 |
20.5 |
|
|
Total |
454 |
371 |
-18.3 |
4,275 |
4,571 |
6.9 |
Operating and capital expenditures |
|
|
|
|
|
|
Defence |
1,436 |
1,623 |
13.0 |
10,992 |
12,301 |
11.9 |
All other departmental
expenditures |
2,686 |
3,054 |
13.7 |
23,824 |
25,389 |
6.6 |
|
|
Total |
4,122 |
4,677 |
13.5 |
34,816 |
37,690 |
8.3 |
Total direct program spending |
7,288 |
8,591 |
17.9 |
54,527 |
59,544 |
9.2 |
Total program expenditures |
12,201 |
14,150 |
16.0 |
115,542 |
125,643 |
8.7 |
Public debt charges |
3,564 |
2,757 |
-22.6 |
41,412 |
38,709 |
-6.5 |
|
|
Total budgetary expenditures |
15,765 |
16,907 |
7.2 |
156,954 |
164,352 |
4.7 |
|
Memorandum item:
Total transfers |
7,625 |
9,102 |
19.4 |
76,451 |
83,382 |
9.1 |
|
Financial source of $5.8 billion (excluding foreign
exchange transactions) for April 2001 to March 2002
The budgetary balance is presented on a modified accrual basis of accounting, recording government liabilities when they are incurred, regardless of when the cash payment is made. In addition, the budgetary balance includes only those activities over which the Government has legislative control.
In contrast, financial requirements/source measures the difference between cash coming in to the Government and cash going out. Financial requirements/source differs from the budgetary balance as the former includes transactions in loans, investments and advances, federal employees’ pension accounts, other specified purpose accounts, and changes in other financial assets and liabilities. These activities are included as part of non-budgetary transactions. The conversion from accrual to cash is also reflected in non-budgetary transactions.
Non-budgetary transactions resulted in a net requirement of $4.0 billion in the April 2001 to March 2002 period, compared to a net requirement of $0.5 billion in the same period of 2000-01. The increase to date is largely attributable to transfers of applicable pension assets to those Crown corporations setting up their own pension plans.
As a result, with a budgetary surplus of $9.8 billion and a net requirement of $4.0 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $5.8 billion in the April 2001 to March 2002 period, compared to a source of $19.6 billion in the same period of 2000-01.
Table 4 The budgetary balance and financial requirements/source
|
|
March |
April to March |
|
2001 |
2002 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
-2,488 |
-4,883 |
20,052 |
9,778 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
99 |
371 |
504 |
923 |
Other |
-87 |
-111 |
-976 |
-1,268 |
|
|
Total |
12 |
260 |
-472 |
-345 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
578 |
1,053 |
192 |
365 |
Superannuation accounts |
-24 |
-249 |
1,346 |
-1,976 |
Other |
8 |
5 |
117 |
201 |
|
|
Total |
562 |
809 |
1,655 |
-1,410 |
|
|
Other transactions |
5,743 |
6,258 |
-1,668 |
-2,214 |
Total non-budgetary transactions |
6,317 |
7,327 |
-485 |
-3,969 |
Financial requirements/ source (excluding foreign
exchange transactions) |
3,829 |
2,444 |
19,567 |
5,809 |
Foreign exchange transactions |
-4,716 |
-732 |
-8,654 |
-1,849 |
|
|
Net financial balance |
-887 |
1,712 |
10,913 |
3,960 |
|
Table 5 Net financial balance and net borrowings
|
|
March |
April to March |
|
2001 |
2002 |
2000-01 |
2001-02 |
|
|
($ millions) |
Net financial balance |
-887 |
1,712 |
10,913 |
3,960 |
Net increase (+)/ decrease (-)
in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable bonds |
-9,694 |
916 |
700 |
-1,598 |
Treasury bills |
7,000 |
-200 |
-11,150 |
5,500 |
Canada Savings Bonds |
18 |
-16 |
-736 |
-2,886 |
Other |
-17 |
-20 |
-79 |
-83 |
|
|
Total |
-2,693 |
680 |
-11,265 |
933 |
Payable in foreign currencies |
|
|
|
|
Marketable bonds |
3,003 |
218 |
-1,164 |
-1,358 |
Notes and loans |
-1,385 |
0 |
0 |
-514 |
Canada bills |
1,094 |
-584 |
1,220 |
-3,872 |
Canada notes |
563 |
-47 |
527 |
-378 |
|
|
Total |
3,275 |
-413 |
583 |
-6,122 |
|
|
Net change in borrowings |
582 |
267 |
-10,682 |
-5,189 |
Change in cash balance |
-305 |
1,979 |
231 |
-1,229 |
|
Table 6 Condensed statement of assets and liabilities
|
|
March 31, 2001 |
March 31, 2002 |
Change |
|
|
($ millions) |
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
43,644 |
38,270 |
-5,374 |
Interest-bearing debt |
|
|
|
Pension and other accounts |
|
|
|
Public sector pensions |
129,185 |
127,209 |
-1,976 |
Canada Pension Plan
(net of securities) |
6,391 |
6,756 |
365 |
Other pension and other
accounts |
7,253 |
7,454 |
201 |
|
|
Total pension and other
accounts |
142,829 |
141,419 |
-1,410 |
Unmatured debt |
|
|
|
Payable in Canadian dollars |
|
|
|
Marketable bonds |
294,973 |
293,375 |
-1,598 |
Treasury bills |
88,700 |
94,200 |
5,500 |
Canada Savings Bonds |
26,099 |
23,213 |
-2,886 |
Other |
3,473 |
3,391 |
-82 |
|
|
Subtotal |
413,245 |
414,180 |
935 |
Payable in foreign currencies |
33,158 |
27,036 |
-6,122 |
Total unmatured debt |
446,403 |
441,215 |
-5,188 |
Total interest-bearing debt |
589,232 |
582,634 |
-6,598 |
Total liabilities |
632,876 |
620,904 |
-11,973 |
Assets |
|
|
|
Cash and accounts receivable |
19,186 |
14,796 |
-4,390 |
Foreign exchange accounts |
50,270 |
52,119 |
1,849 |
Loans, investments and advances |
|
|
|
(net of allowances) |
16,042 |
16,387 |
345 |
|
|
Total assets |
85,498 |
83,303 |
-2,196 |
|
|
Accumulated deficit (net public debt) |
547,378 |
537,601 |
-9,778 |
|
Net financial source of $4.0 billion
for April 2001 to March 2002
Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account. The purpose of the Exchange Fund Account is to promote order and stability in the foreign exchange market. The buying of Canadian dollars represents a source of funds from exchange fund transactions, while the selling of Canadian dollars represents a requirement. Changes in foreign currency liabilities, which are undertaken to change the level of Canada’s foreign exchange reserves, also impact on foreign exchange transactions. Taking all of these factors into account, there was a net requirement of $1.8 billion in the April 2001 to March 2002 period, compared to a net requirement of $8.7 billion in the same period of 2000-01.
With a budgetary surplus of $9.8 billion, a net requirement of $4.0 billion from non-budgetary transactions and a net requirement of $1.8 billion from foreign exchange transactions, there was a net financial source of $4.0 billion in the April 2001 to March 2002 period, compared to a net source of $10.9 billion in the same period of 2000-01.
Net borrowings down $5.2 billion for April 2001 to
March 2002
In 2001-02 the Government reduced its holding of market debt by $5.2 billion by applying the net financial source of $4.0 billion and drawing down its cash balances by $1.2 billion. 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. At the end of March 2002 they stood at $12.0 billion.
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