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- Fiscal Monitor 2001 -
The Fiscal Monitor
Highlights of financial results for January 2001
Highlights
January 2001: budgetary deficit of $1.1 billion
There was a budgetary deficit of $1.149 billion in January 2001,
compared to a surplus of $811 million in January 2000. Of this $2.0 billion year-over-year deterioration in the fiscal balance, $1.4 billion
was attributable to the Relief for Heating Expenses.
April 2000 to January 2001: budgetary surplus of $16.4 billion
Over the first 10 months of fiscal year 2000-01, the budgetary surplus was estimated at $16.4 billion, up $4.6 billion from the surplus of $11.8 billion reported in the same period of 1999-2000.
These results continue to be in line with the average private sector forecast of the fiscal surplus for 2000-01, as set out in the October 18, 2000, Economic Statement and Budget Update. Over the balance of the fiscal year, the cumulative budgetary surplus is expected to continue to decline, as the full impact of various policy actions is realized. These include the reduction in personal income tax rates; the elimination of the 5-per-cent surtax; increases in the thresholds; the restoration of full indexation of the personal income tax system; and funding for health information and communications technology and the Canada Foundation for Innovation. The net impact of these initiatives is estimated to be at least $3 billion. In addition, corporate income tax revenues over the balance of the year are expected to be lower, reflecting timing considerations. In the Economic Statement and Budget Update, a surplus for the year as a whole of $11.9 billion was estimated, of which a minimum of $10 billion was committed to reducing debt. | January 2001: budgetary results The year-over-year deterioration in the budgetary balance of $2.0 billion was
largely attributable to higher program spending, up $2.4 billion.
This increase was primarily due to the heating expense relief payment and
timing factors reflecting Y2K-related contingency planning
in December 1999, as noted in last month’s Fiscal Monitor.
On a year-over-year basis, budgetary revenues were up 2.6 per cent, or $0.4 billion. Among the major components:
- Personal income tax revenues were down 0.6 per cent, primarily
reflecting lower receipts from monthly deductions from employment income,
due to the impact of the tax relief measures announced in the October 2000 Economic
Statement and Budget Update.
- Employment insurance (EI) premium revenues increased 6.8 per cent,
primarily due to recoveries for underpayments in January 2000. Excluding
these recoveries, EI premium revenues would have declined, reflecting the
reduction in premium rates (the employee rate for 2001 is $2.25 per $100 of
insurable earnings compared to $2.40 in 2000).
- Non-tax revenues were down 24.9 per cent, reflecting the timing of
receipts.
Table 1 Summary statement of transactions
|
|
January |
April to January |
|
2000 |
2001 |
1999-00 |
2000-01 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
13,648 |
14,000 |
133,533 |
144,563 |
Program spending |
-9,288 |
-11,765 |
-87,365 |
-93,776 |
Operating surplus |
4,360 |
2,235 |
46,168 |
50,787 |
Public debt charges |
-3,549 |
-3,384 |
-34,375 |
-34,408 |
Budgetary balance (deficit/surplus) |
811 |
-1,149 |
11,793 |
16,379 |
Non-budgetary transactions |
2,609 |
4,259 |
-2,753 |
-5,570 |
Financial requirements/source
(excluding foreign exchange transactions) |
3,420 |
3,110 |
9,040 |
10,809 |
Foreign exchange transactions |
-6,099 |
-1,694 |
-6,407 |
-1,566 |
Net financial balance |
-2,679 |
1,416 |
2,633 |
9,243 |
Net change in borrowings |
-2,084 |
2,458 |
-2,688 |
-14,158 |
Net change in cash balances |
-4,763 |
3,874 |
-55 |
-4,915 |
Cash balance at end of period |
|
|
9,170 |
8,039 |
|
Note: Positive numbers indicate a net source of funds. Negative numbers
indicate a net requirement for funds. |
Within program spending, on a year-over-year basis:
- Major transfers to persons were up $1.4 billion due to the heating expense
relief payment. Higher elderly benefit payments were offset by lower EI
benefit payments.
- Major transfers to other levels of government were up 13.9 per cent,
reflecting higher cash transfers under the Canada Health
and Social Transfer (CHST) and equalization programs.
- Direct program spending was up 19.2 per cent, reversing the year-over-year
decline of 11.0 per cent in December 2000. As noted in last month’s
Fiscal Monitor, the December 1999 and January 2000 results were
affected by the timing of payments related to contingency planning with
respect to the Y2K computer problem.
The decline in public debt charges, on a year-over-year basis, was attributable to timing adjustments.
April 2000 to January 2001: budgetary results
Over the first 10 months of fiscal year 2000-01, the budgetary surplus was estimated at $16.4 billion, up $4.6 billion from the surplus of $11.8 billion reported in the same period of 1999-2000.
Budgetary revenues were up $11.0 billion, or 8.3 per cent, on a year-over-year basis. Among the major revenue components:
- Personal income tax collections were up $4.2 billion, or 6.4 per
cent, primarily reflecting higher receipts from monthly deductions from
employment income, due to increases in the number of people employed. In
addition, higher taxes paid on filing and lower refunds, pertaining to
the 1999 taxation year, also contributed to the year-over-year increase.
Dampening the impact of these factors is the effect of the tax relief
measures announced in the February 2000 budget and the October 2000 Economic
Statement and Budget Update and higher transfers to the Canada Pension
Plan and EI accounts, reflecting underpayments with respect to the 1999
taxation year. Over the balance of the fiscal year, growth in this
component will be further restrained as the full impact of tax reductions
announced in the February 2000 budget and October 2000 Economic Statement
and Budget Update is realized.
Table 2 Budgetary revenues
|
|
January |
|
April to January |
|
|
2000 |
2001 |
Change |
1999-00 |
2000-01 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Income taxes |
|
|
|
|
|
|
Personal income tax |
6,798 |
6,758 |
-0.6 |
66,663 |
70,897 |
6.4 |
Corporate income tax |
1,608 |
1,642 |
2.1 |
15,748 |
19,153 |
21.6 |
Other income tax revenue |
589 |
655 |
11.2 |
2,762 |
3,002 |
8.7 |
Total income tax |
8,995 |
9,055 |
0.7 |
85,173 |
93,052 |
9.3 |
Employment insurance
premium revenues
|
1,347 |
1,439 |
6.8 |
14,659 |
15,024 |
2.5 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
2,088 |
2,340 |
12.1 |
19,742 |
21,455 |
8.7 |
Customs import duties |
108 |
219 |
102.8 |
1,871 |
2,293 |
22.6 |
Sales and excise taxes |
705 |
643 |
-8.8 |
6,888 |
6,954 |
1.0 |
Total excise taxes and duties |
2,901 |
3,202 |
10.4 |
28,501 |
30,702 |
7.7 |
Total tax revenues |
13,243 |
13,696 |
3.4 |
128,333 |
138,778 |
8.1 |
Non-tax revenues |
405 |
304 |
-24.9 |
5,200 |
5,785 |
11.3 |
Total budgetary revenues |
13,648 |
14,000 |
2.6 |
133,533 |
144,563 |
8.3 |
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- Corporate income tax revenues were up $3.4 billion, or 21.6 per cent,
reflecting the increase of 23.4 per cent in corporate profits registered in
2000. However, the growth in revenues is expected to continue to decline
over the balance of the year, given the composition of corporate profits and
the monthly instalment procedures.
- EI premium revenues were up $0.4 billion, or 2.5 per cent, as the decline
in premium rates for 2000 and 2001 was more than offset by the impact of
prior-year adjustments and the growth in the number of people employed and
therefore paying premiums.
- Excise taxes and duties increased by $2.2 billion, or 7.7 per cent.
GST revenues were up $1.7 billion, or 8.7 per cent, in line with the growth
in consumer demand. Customs import duties were up strongly, while sales and
excise taxes were up marginally.
- Non-tax revenues were up $0.6 billion, or 11.3 per cent.
Program spending increased by $6.4 billion, or 7.3 per cent, in the April 2000 to January 2001 period, compared to the same period in 1999-2000. This increase was spread among all major components.
- Major transfers to persons were up 5.9 per cent, attributable to the
heating expense relief payment and higher elderly benefits. The
higher elderly benefits reflect an increase in the number of
individuals eligible for benefits and higher average benefits, which are
indexed to inflation. EI benefit payments were lower, reflecting fewer
beneficiaries due to the decline in the number of unemployed, dampened by
the impact of higher average benefit rates and higher transfers to provinces
under the Labour Market Agreements.
Table 3 Budgetary expenditures
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|
January |
|
April to January |
|
|
2000 |
2001 |
Change |
1999-00 |
2000-01 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Transfer payments to |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
1,909 |
2,054 |
7.6 |
19,451 |
20,133 |
3.5 |
Employment
insurance benefits |
1,324 |
1,157 |
-12.6 |
9,204 |
8,775 |
-4.7 |
Heating expense relief |
|
1,434 |
|
|
1,434 |
|
Total |
3,233 |
4,645 |
43.7 |
28,655 |
30,342 |
5.9 |
Other levels of government |
|
|
|
|
|
|
Canada Health and
Social Transfer |
1,042 |
1,125 |
8.0 |
10,417 |
11,250 |
8.0 |
Fiscal transfers |
989 |
1,181 |
19.4 |
9,020 |
10,201 |
13.1 |
Medical Equipment
Fund |
|
|
|
|
1,000 |
|
Alternative Payments
for Standing
Programs
|
-188 |
-206 |
9.6 |
-1,876 |
-2,055 |
9.5 |
Total |
1,843 |
2,100 |
13.9 |
17,561 |
20,396 |
16.1 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
690 |
57 |
-91.7 |
1,220 |
440 |
-63.9 |
Foreign Affairs |
160 |
149 |
-6.9 |
1,212 |
1,175 |
-3.1 |
Health |
43 |
105 |
144.2 |
861 |
925 |
7.4 |
Human Resources
Development |
96 |
366 |
281.3 |
1,247 |
1,181 |
-5.3 |
Indian and Northern
Development |
161 |
206 |
28.0 |
3,270 |
3,473 |
6.2 |
Industry
and Regional
Development |
77 |
87 |
13.0 |
1,136 |
1,100 |
-3.2 |
Veterans Affairs |
119 |
130 |
9.2 |
1,157 |
1,208 |
4.4 |
Other |
160 |
202 |
26.1 |
1,682 |
1,779 |
5.7 |
Total |
1,506 |
1,302 |
-13.6 |
11,785 |
11,281 |
-4.3 |
Payments to Crown
corporations |
|
|
|
|
|
|
Canadian Broadcasting
Corporation |
20 |
65 |
225.0 |
730 |
843 |
15.5 |
Canada Mortgage and
Housing Corporation |
150 |
150 |
0.0 |
1,495 |
1,520 |
1.7 |
Other |
70 |
82 |
17.1 |
875 |
1,221 |
39.5 |
Total |
240 |
297 |
23.8 |
3,100 |
3,584 |
15.6 |
Operating and capital expenditures |
|
|
|
|
|
|
Defence |
740 |
1,004 |
35.7 |
8,643 |
8,652 |
0.1 |
All other departmental
expenditures |
1,726 |
2,417 |
40.0 |
17,621 |
19,521 |
10.8 |
Total |
2,466 |
3,421 |
38.7 |
26,264 |
28,173 |
7.3 |
Total direct program spending |
4,212 |
5,020 |
19.2 |
41,149 |
43,038 |
4.6 |
Total program expenditures |
9,288 |
11,765 |
26.7 |
87,365 |
93,776 |
7.3 |
Public debt charges |
3,549 |
3,384 |
-4.6 |
34,375 |
34,408 |
0.1 |
Total budgetary expenditures |
12,837 |
15,149 |
18.0 |
121,740 |
128,184 |
5.3 |
|
Memorandum item:
Total transfers |
6,582 |
8,047 |
22.3 |
58,001 |
62,019 |
6.9 |
|
- Major transfers to other levels of government were up 16.1 per cent,
reflecting higher cash transfers under the CHST and equalization programs,
as well as the $1-billion payment in trust to the provinces and
territories for new medical equipment, to support the agreements reached by
the first ministers on health renewal and early childhood development. The
increase in CHST cash transfers reflected the 1999 budget measure
to increase base funding from $12.5 billion in 1999-2000 to $13.5 billion in
2000-01. The increase in equalization entitlements was attributable to the
continued stronger economic growth in Ontario than in
the equalization-receiving provinces.
- Direct program spending, consisting of total program spending less the
major transfers to persons and other levels of government, increased by
4.6 per cent. This component includes subsidy and other transfer payments,
payments to Crown corporations, and the operating and capital costs of
government, including defence. Developments in this component are affected
by the timing of payments, the impact of new initiatives announced in the
2000 budget, and the lifting of the wage freeze.
Public debt charges were up marginally, as an increase in the average effective interest rate on interest-bearing debt more than offset a decline in the stock of that debt.
Financial source of $10.8 billion (excluding foreign exchange
transactions) for April 2000 to January 2001
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 $5.6 billion in first 10 months of 2000-01, compared to a requirement of $2.8 billion in the same period in 1999-2000. This was attributable, in part, to the payments related to the pay equity settlement, changes to the financing of the Canada Student Loans Program, and the investing of current contributions to the federal employees’ pension plans in the private market.
As a result, with a budgetary surplus of $16.4 billion and a net requirement of $5.6 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $10.8 billion in the April 2000 to January 2001 period, compared to a financial source of $9.0 billion in the same period in 1999-2000.
Net financial source of $9.2 billion for April 2000 to January
2001
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 $1.6 billion in the first 10 months of 2000-01, compared to a net requirement of $6.4 billion in the same period in 1999-2000.
Table 4 The budgetary balance and financial requirements/source
|
|
January |
April to January |
|
2000 |
2001 |
1999-00 |
2000-01 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
811 |
-1,149 |
11,793 |
16,379 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
86 |
53 |
393 |
401 |
Other |
41 |
-43 |
-63 |
-885 |
Total |
127 |
10 |
330 |
-484 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
-482 |
-352 |
-471 |
-876 |
Superannuation accounts |
504 |
17 |
4,206 |
1,571 |
Other |
-24 |
17 |
-130 |
-31 |
Total |
-2 |
-318 |
3,605 |
664 |
Other transactions |
2,484 |
4,567 |
-6,688 |
-5,750 |
Total non-budgetary transactions |
2,609 |
4,259 |
-2,753 |
-5,570 |
Financial requirements/source |
|
|
|
|
(excluding foreign exchange transactions) |
3,420 |
3,110 |
9,040 |
10,809 |
Foreign exchange transactions |
-6,099 |
-1,694 |
-6,407 |
-1,566 |
Net financial balance |
-2,679 |
1,416 |
2,633 |
9,243 |
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Table 5 Net financial balance and net borrowings
|
|
January |
April to January |
|
2000 |
2001 |
1999-00 |
2000-01 |
|
|
($ millions) |
Net financial balance |
-2,679 |
1,416 |
2,633 |
9,243 |
Net increase (+)/decrease (-) in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable
bonds |
8 |
1,500 |
6,957 |
9,819 |
Canada
Savings Bonds |
-4 |
136 |
-684 |
-1,067 |
Treasury
bills |
-1,950 |
900 |
-5,450 |
-20,250 |
Other |
50 |
34 |
-285 |
-62 |
Total |
-1,896 |
2,570 |
538 |
-11,560 |
Payable in foreign currencies |
|
|
|
|
Marketable
bonds |
0 |
0 |
2,527 |
-2,202 |
Notes and
loans |
|
-580 |
|
-580 |
Canada
bills |
-180 |
468 |
-5,489 |
220 |
Canada
notes |
-8 |
|
-264 |
-36 |
Total |
-188 |
-112 |
-3,226 |
-2,598 |
Net change in borrowings |
-2,084 |
2,458 |
-2,688 |
-14,158 |
Change in cash balance |
-4,763 |
3,874 |
-55 |
-4,915 |
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Table 6 Condensed statement of assets and liabilities
|
|
March 31, 2000 |
January 31, 2001 |
Change |
|
|
($ millions) |
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
40,748 |
31,250 |
-9,498 |
Interest-bearing debt |
|
|
|
Pension and other
accounts |
|
|
|
Public
sector pensions |
128,346 |
129,917 |
1,571 |
Canada
Pension Plan
(net of securities) |
6,217 |
5,341 |
-876 |
Other
pension and
other accounts |
6,963 |
6,932 |
-31 |
Total
pension and
other accounts |
141,526 |
142,190 |
664 |
Unmatured
debt |
|
|
|
Payable
in Canadian dollars |
|
|
|
Marketable bonds |
293,927 |
303,746 |
9,819 |
Treasury
bills |
99,850 |
79,600 |
-20,250 |
Canada
Savings Bonds |
26,489 |
25,422 |
-1,067 |
Non-marketable bonds
and bills |
3,552 |
3,490 |
-62 |
Subtotal |
423,818 |
412,258 |
-11,560 |
Payable
in foreign currencies |
32,588 |
29,992 |
-2,596 |
Total
unmatured debt |
456,406 |
442,250 |
-14,156 |
Total
interest-bearing debt |
597,932 |
584,440 |
-13,492 |
Total liabilities |
638,680 |
615,690 |
-22,990 |
Assets |
|
|
|
Cash and accounts receivable |
18,864 |
10,203 |
-8,661 |
Foreign exchange accounts |
41,494 |
43,060 |
1,566 |
Loans, investments and advances (net of allowances) |
13,796 |
14,280 |
484 |
Total assets |
74,154 |
67,543 |
-6,611 |
Accumulated deficit (net public debt) |
564,526 |
548,147 |
-16,379 |
|
With a budgetary surplus of $16.4 billion, a net requirement of $5.6 billion from non-budgetary transactions and a net requirement of $1.6 billion from foreign exchange transactions, there was a net financial source of $9.2 billion in the April 2000 to January 2001 period, compared to a net source of $2.6 billion in the same period in 1999-2000.
Net borrowings down $14.2 billion for April 2000 to January 2001
This financial source, coupled with a drawdown in cash balances of $4.9 billion, resulted in a decline of $14.2 billion in the Government’s holding of market debt to the end of January 2001. 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 January 2001 cash balances were $8.0 billion.
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