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- Fiscal Monitor 2002 -
The Fiscal Monitor
Highlights of financial results for June 2002
Highlights
June 2002: budgetary surplus of $4.0 billion
There was a budgetary surplus of $4.0 billion in June 2002, compared to a surplus of $2.8 billion in†June 2001.1 Since 1996-97 large surpluses have been recorded in the month of June, primarily reflecting the inclusion of quarterly personal income tax instalment payments. Most of the year-over-year improvement in the budgetary balance is attributable to higher budgetary revenues, in†part reflecting strong employment gains since the beginning of the year. In addition, there were one-time technical factors that impacted positively on revenues in June 2002, including adjustments pertaining to previous months and timing of receipts.
April to June 2002: budgetary surplus of $4.8 billion
The budgetary surplus is estimated at $4.8 billion for the April to June 2002 period, compared to a surplus of $9.6 billion reported in the same period of 2001-02. The decline in the year-over-year surplus is largely attributable to developments affecting final personal income tax payments with respect to the 2001 tax year. This decline was expected given the extraordinary net capital gains realizations in the 2000 tax year, which resulted in record high final income tax payments in April and May 2001, and the†decline in the stock market in 2001, which resulted in higher refunds and lower settlement payments in April and May 2002.
1 Budgetary revenues over the April to June period last year were affected by systems problems relating to personal income tax and goods and services tax (GST) refunds. This had the effect of overstating the April 2001 budgetary surplus and understating the surpluses in May and June. This will have no impact on the final results for the year as a whole. The June 2001 surplus was originally estimated at $2.5 billion.
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June 2002: budgetary results
Budgetary revenues increased $1.3 billion, or 8.3 per cent, in June 2002 on a year-over-year basis.
- Personal income tax revenues increased $0.9 billion, or 11.8 per cent,
primarily reflecting higher tax deductions from employment income,
attributable to the strong growth in employment since the beginning of
the year. In addition, the timing of receipts and adjustments pertaining
to previous periods contributed to the gain in June 2002.
- Corporate income tax revenues were down $0.1 billion, or 5.1 per cent,
attributable to higher refunds relating to the overpayment of taxes in
the past.
- Employment insurance (EI) premium revenues were virtually unchanged,
as the decline in premium rates (the employee rate for 2002 is $2.20 per
$100 of insurable earnings compared to $2.25 in 2001) offset the impact
of the growth in the number of people employed and therefore paying
premiums.
- Excise taxes and duties were up $0.3 billion, or 10.5 per cent,
primarily attributable to a strong gain in GST revenues, reflecting both
increases in gross collections and lower refunds.
- Non-tax revenues were up sharply, reflecting the timing of receipts.
They were down in May.
Table 1 Summary statement of transactions
|
|
June |
April to June |
|
2001 |
2002 |
2001-02 |
2002-03 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
15,349 |
16,627 |
47,274 |
43,232 |
Program spending |
-9,446 |
-9,569 |
-27,816 |
-29,599 |
|
|
Operating surplus |
5,903 |
7,058 |
19,458 |
13,633 |
Public debt charges |
-3,111 |
-3,022 |
-9,904 |
-8,865 |
|
|
Budgetary balance (deficit/surplus) |
2,792 |
4,036 |
9,554 |
4,768 |
Non-budgetary transactions |
-7,887 |
-7,887 |
-10,348 |
-12,559 |
Financial requirements/source
(excluding foreign exchange transactions) |
-5,095 |
-3,851 |
-794 |
-7,791 |
|
|
Foreign exchange transactions |
449 |
-607 |
312 |
-1,255 |
Net financial balance |
-4,646 |
-4,458 |
-482 |
-9,046 |
Net change in borrowings |
-8,170 |
-3,419 |
-8,983 |
2,078 |
Net change in cash balances |
-12,816 |
-7,877 |
-9,465 |
-6,968 |
Cash balance at end of period |
|
|
3,708 |
4,979 |
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Note: Positive numbers indicate a net source of funds. Negative
numbers indicate a net requirement for funds. Monthly estimates for
2001-02 have been revised from those previously published. |
On a year-over-year basis, program spending increased by $0.1 billion, or 1.3 per cent, as lower defence spending and subsidies and other transfers offset much of the increases in the other major components.
- Transfers to persons were up 7.9 per cent. Elderly benefits increased
6.5 per cent, reflecting an increase in the number of individuals
receiving benefits and higher average benefits, which are indexed to
inflation. The increase of 10.9 per cent in EI benefits was attributable
to both higher regular benefits, reflecting an increase in the number of
beneficiaries, and program enhancements.
- Transfers to other levels of government were up 4.2 per cent,
reflecting higher cash transfers under the Canada Health and Social
Transfer (CHST). This increase reflects the September 2000 agreement
reached by first ministers to increase base funding from $17.3 billion
in 2001-02 to $18.6 billion in 2002-03.
- Direct program spending, consisting of total program spending less
transfers to persons and other levels of government, declined by 4.9 per
cent, reflecting lower subsidies and other transfers and defence
spending. The monthly fluctuations in these components are due in large
part to the timing of payments.
Public debt charges, on a year-over year basis, declined 2.9 per cent, solely attributable to a decrease in the average effective interest rate, as the stock of interest-bearing debt was slightly higher.
Table 2 Budgetary revenues
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|
June |
|
April to June |
|
2001 |
2002 |
Change |
2001-02 |
2002-03 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Income taxes |
|
|
|
|
|
|
Personal income tax |
7,382 |
8,250 |
11.8 |
23,560 |
20,062 |
-14.8 |
Corporate income tax |
2,312 |
2,194 |
-5.1 |
6,832 |
5,340 |
-21.8 |
Other income tax revenue |
243 |
242 |
-0.4 |
913 |
806 |
-11.7 |
|
|
Total income tax |
9,937 |
10,686 |
7.5 |
31,305 |
26,208 |
-16.3 |
Employment insurance
premium revenues |
1,748 |
1,729 |
-1.1 |
5,327 |
5,240 |
-1.6 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
1,916 |
2,177 |
13.6 |
5,747 |
6,508 |
13.2 |
Customs import duties |
278 |
314 |
12.9 |
673 |
802 |
19.2 |
Sales and excise taxes |
794 |
783 |
-1.4 |
2,174 |
2,285 |
5.1 |
Air Travellers Security Charge |
|
28 |
|
|
48 |
|
|
|
Total excise taxes and duties |
2,988 |
3,302 |
10.5 |
8,594 |
9,643 |
12.2 |
|
|
Total tax revenues |
14,673 |
15,717 |
7.1 |
45,226 |
41,091 |
-9.1 |
Non-tax revenues |
676 |
910 |
34.6 |
2,048 |
2,141 |
4.5 |
|
|
Total budgetary revenues |
15,349 |
16,627 |
8.3 |
47,274 |
43,232 |
-8.6 |
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April to June 2002: budgetary results
Over the first three months of fiscal year 2002-03, the budgetary surplus was estimated at $4.8 billion, compared to a surplus of $9.6 billion reported in the same period of 2001-02. This decline reflects lower budgetary revenues, largely attributable to developments related to the 2001 tax year, and higher program spending. In contrast, public debt charges were lower.
Budgetary revenues were down $4.0 billion, or 8.6 per cent, on a year-over-year basis. Among the major components:
- Personal income tax collections declined $3.5 billion, or 14.8 per
cent. Virtually all of this decline is attributable to lower final tax
payments and higher refunds with respect to the 2001 tax year,
reflecting weakness in the stock market and the associated lower net
capital gains realizations. However, it should be noted that the results
for the same period in 2001 were affected by the extraordinary stock
market gains in 2000, which resulted in record final tax settlement
payments in April and May 2001. The results to date were also dampened
by the impact of the tax reduction measures announced in the February
2000 budget and October 2000 Economic Statement and Budget Update.
Partially offsetting these impacts were higher taxes associated with
increases in employment income.
- Corporate income tax revenues were down $1.5 billion, or 21.8 per
cent. This is primarily attributable to higher refunds pertaining to
previous years’ taxes paid. In addition, monthly instalment payments
are lower as they are largely based on 2001 tax liabilities, a year in
which corporate profits declined.
- EI premium revenues were down marginally, primarily due to the lower
premium rates in effect for 2002.
- Excise taxes and duties increased by $1.0 billion, or 12.2 per cent,
primarily reflecting higher GST revenues, customs import duties and the
increases in tobacco excise taxes and duties.
- Non-tax revenues were up 4.5 per cent.
Program spending increased by $1.8 billion, or 6.4 per cent, in the April to June 2002 period, compared to the same period last year.
- Transfers to persons were up 10.3 per cent, reflecting both higher
elderly and EI benefits.
- Transfers to other levels of government were up 4.3 per cent,
attributable to higher cash transfers under the CHST. Entitlements under
the fiscal transfer programs were virtually unchanged, primarily
reflecting the timing of payments.
- Direct program spending increased by 4.6 per cent. During the first
few months of the fiscal year, developments in this component are
largely affected by the timing of payments.
Public debt charges declined by $1.0 billion, or 10.5 per cent, reflecting the impact of the lower average effective interest rate on the stock of debt.
Table 3 Budgetary expenditures
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June |
|
April to June |
|
|
2001 |
2002 |
Change |
2001-02 |
2002-03 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
2,050 |
2,184 |
6.5 |
6,204 |
6,562 |
5.8 |
Employment insurance
benefits |
903 |
1,001 |
10.9 |
2,891 |
3,472 |
20.1 |
|
|
Total |
2,953 |
3,185 |
7.9 |
9,095 |
10,034 |
10.3 |
Other levels of government |
|
|
|
|
|
|
Canada Health and
Social Transfer |
1,442 |
1,550 |
7.5 |
4,325 |
4,650 |
7.5 |
Fiscal transfers |
1,057 |
1,056 |
-0.1 |
3,099 |
3,096 |
-0.1 |
Alternative Payments for |
|
|
|
|
|
|
Standing Programs |
-200 |
-210 |
5.0 |
-600 |
-630 |
5.0 |
|
|
Total |
2,299 |
2,396 |
4.2 |
6,824 |
7,116 |
4.3 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
152 |
7 |
-95.4 |
381 |
64 |
-83.2 |
Foreign Affairs |
141 |
88 |
-37.6 |
325 |
213 |
-34.5 |
Health |
75 |
82 |
9.3 |
273 |
324 |
18.7 |
Human Resources Development |
86 |
95 |
10.5 |
239 |
275 |
15.1 |
Indian and Northern
Development |
255 |
300 |
17.6 |
1,171 |
1,163 |
-0.7 |
Industry and Regional
Development |
174 |
148 |
-14.9 |
326 |
317 |
-2.8 |
Veterans Affairs |
123 |
137 |
11.4 |
366 |
418 |
14.2 |
Other |
196 |
197 |
0.5 |
684 |
520 |
-24.0 |
|
|
Total |
1,202 |
1,054 |
-12.3 |
3,765 |
3,294 |
-12.5 |
Payments to Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting
Corporation |
80 |
74 |
-7.5 |
320 |
332 |
3.8 |
Canada Mortgage and Housing |
|
|
|
|
|
|
Corporation |
158 |
159 |
0.6 |
474 |
489 |
3.2 |
Other |
110 |
116 |
5.5 |
439 |
476 |
8.4 |
|
|
Total |
348 |
349 |
0.3 |
1,233 |
1,297 |
5.2 |
Operating and capital
expenditures |
|
|
|
|
|
|
Defence |
1,009 |
730 |
-27.7 |
2,018 |
2,107 |
4.4 |
All other departmental
expenditures |
1,635 |
1,855 |
13.5 |
4,881 |
5,751 |
17.8 |
|
|
Total |
2,644 |
2,585 |
-2.2 |
6,899 |
7,858 |
13.9 |
Total direct program spending |
4,194 |
3,988 |
-4.9 |
11,897 |
12,449 |
4.6 |
Total program expenditures |
9,446 |
9,569 |
1.3 |
27,816 |
29,599 |
6.4 |
Public debt charges |
3,111 |
3,022 |
-2.9 |
9,904 |
8,865 |
-10.5 |
|
|
Total budgetary expenditures |
12,557 |
12,591 |
0.3 |
37,720 |
38,464 |
2.0 |
Memorandum item: |
|
|
|
|
|
|
Total transfers |
6,454 |
6,635 |
2.8 |
19,684 |
20,444 |
3.9 |
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Financial requirement of $7.8 billion (excluding foreign exchange
transactions) for April to June 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 $12.6 billion in the first three months of 2002-03, compared to a net requirement of $10.3 billion in the same period in 2001-02.
As a result, with a budgetary surplus of $4.8 billion and a net requirement of $12.6 billion from non-budgetary transactions, there was a financial requirement (excluding foreign exchange transactions) of $7.8 billion in the April to June 2002 period, compared to a financial requirement of $0.8 billion in the same period last year.
Net financial requirement of $9.0 billion for April to June 2002
Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account (EFA). The objectives of the EFA are to provide general foreign currency liquidity for the Government and promote orderly conditions in the foreign exchange market. The EFA contains foreign currency investments, the Government’s gold holdings and assets related to Canada’s commitment to the International Monetary Fund (IMF). Increases in the level of the reserves through borrowings, contributions to the IMF, and/or selling of Canadian dollars represent a requirement. Conversely, decreases in the level of reserves represent a source of funds. Taking all of these factors into account, there was a net requirement of $1.3 billion in the first three months of 2002-03, compared to a net source of $0.3 billion in the same period in 2001-02.
With a budgetary surplus of $4.8 billion, a net requirement of $12.6 billion from non-budgetary transactions and a net requirement of $1.3 billion from foreign exchange transactions, there was a net financial requirement of $9.0 billion in the April to June 2002 period, compared to a net requirement of $0.5 billion in the same period last year.
Table 4 The budgetary balance and financial requirements/source
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|
June |
April to June |
|
2001 |
2002 |
2001-02 |
2002-03 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
2,792 |
4,036 |
9,554 |
4,768 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
52 |
62 |
232 |
77 |
Other |
92 |
63 |
33 |
93 |
|
|
Total |
144 |
125 |
265 |
170 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
-670 |
-116 |
-443 |
155 |
Superannuation accounts |
-302 |
-508 |
-496 |
-595 |
Other |
-75 |
-112 |
-22 |
-166 |
|
|
Total |
-1,047 |
-736 |
-961 |
-606 |
Other transactions |
-6,984 |
-7,276 |
-9,652 |
-12,123 |
|
|
Total non-budgetary transactions |
-7,887 |
-7,887 |
-10,348 |
-12,559 |
Financial requirements/source
(excluding foreign exchange transactions) |
-5,095 |
-3,851 |
-794 |
-7,791 |
Foreign exchange transactions |
449 |
-607 |
312 |
-1,255 |
|
|
Net financial balance |
-4,646 |
-4,458 |
-482 |
-9,046 |
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Table 5 Net financial balance and net borrowings
|
|
June |
April to June |
|
2001 |
2002 |
2001-02 |
2002-03 |
|
|
($ millions) |
Net financial balance |
-4,646 |
-4,458 |
-482 |
-9,046 |
Net increase (+)/decrease (-) in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable bonds |
-3,187 |
-3,897 |
-2,041 |
-6,053 |
Canada Savings Bonds |
-86 |
-161 |
-166 |
-312 |
Treasury bills |
-3,600 |
700 |
-4,600 |
8,700 |
Other |
-4 |
-6 |
-4 |
-8 |
|
|
Total |
-6,877 |
-3,364 |
-6,811 |
2,327 |
Payable in foreign currencies |
|
|
|
|
Marketable bonds |
0 |
0 |
-1,576 |
0 |
Notes and loans |
-41 |
|
-41 |
|
Canada bills |
-1,252 |
-55 |
-382 |
-249 |
Canada notes |
0 |
0 |
-173 |
0 |
|
|
Total |
-1,293 |
-55 |
-2,172 |
-249 |
|
|
Net change in borrowings |
-8,170 |
-3,419 |
-8,983 |
2,078 |
Change in cash balance |
-12,816 |
-7,877 |
-9,465 |
-6,968 |
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Table 6 Condensed statement of assets and liabilities1
|
|
March 31, 2002 |
June 30, 2002 |
Change |
|
|
($ millions) |
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
41,014 |
29,206 |
-11,808 |
Interest-bearing debt |
|
|
|
Pension and other accounts |
|
|
|
Public sector pensions |
127,209 |
126,614 |
-595 |
Canada Pension Plan
(net of securities) |
6,756 |
6,911 |
155 |
Other pension and other
accounts |
7,454 |
7,288 |
-166 |
|
|
Total pension and other
accounts |
141,419 |
140,813 |
-606 |
Unmatured debt |
|
|
|
Payable in Canadian dollars |
|
|
|
Marketable bonds |
293,865 |
287,791 |
-6,074 |
Treasury bills |
94,200 |
102,740 |
8,540 |
Canada Savings
Bonds |
23,759 |
23,654 |
-105 |
Other |
3,390 |
3,383 |
-7 |
|
|
Subtotal |
415,214 |
417,568 |
2,354 |
Payable in foreign currencies |
27,033 |
26,782 |
-251 |
|
|
Total unmatured debt |
442,247 |
444,350 |
2,103 |
Total interest-bearing debt |
583,666 |
585,163 |
1,497 |
Total liabilities |
624,680 |
614,369 |
-10,311 |
Assets |
|
|
|
Cash and accounts receivable |
14,796 |
8,168 |
-6,628 |
Foreign exchange accounts |
52,119 |
53,374 |
1,255 |
Loans, investments and advances
(net of allowances) |
16,387 |
16,217 |
-170 |
|
|
Total assets |
83,302 |
77,759 |
-5,543 |
|
|
Accumulated deficit
(net public debt) |
541,378 |
536,610 |
-4,768 |
1 Assumes a fiscal balance of $6
billion for 2001-02. |
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Net borrowings up $2.1 billion for April to June 2002
To finance this net financial requirement, the Government increased its holding of market debt by $2.1 billion to the end of June 2002 and lowered its cash balances by $7.0 billion to $5.0 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. |