Annual lists 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

- Fiscal Monitor 2001 -

The Fiscal Monitor

Highlights of financial results for February 2001

• Adobe Acrobat Version (56,880 bytes).

February 2001: budgetary results

The year-over-year improvement in the budgetary balance of $0.9 billion was attributable to higher budgetary revenues, primarily higher corporate income tax revenues. On a year-over-year basis, budgetary revenues were up 6.4 per cent, or $1.0 billion. Among the major revenue components:

• Personal income tax revenues were up slightly, as the impact of the tax relief measures announced in the October Economic Statement and Budget Update dampened the overall growth in monthly deductions from employment income.

• Corporate income tax revenues were up $0.7 billion, or 13.4 per cent, reflecting higher corporate profits in 2000.

• EI premium revenues declined 11.5 per cent, primarily due to transfers relating to underpayments during 1999, which boosted revenues in February 2000.

• Excise taxes and duties were up 4.5 per cent, primarily reflecting strong growth in customs import duties.

• Non-tax revenues were up strongly, reflecting the timing of receipts.

Table 1
Summary statement of transactions

On a year-over-year basis, program spending increased by $0.2 billion, or 1.8 per cent, as higher transfers to persons and other levels of government were largely offset by lower direct program spending. Among the major components:

• Major transfers to persons were up $0.2 billion, as both elderly benefit payments and EI benefit payments were higher.

• Major transfers to other levels of government were up 15.5 per cent, reflecting higher cash transfers under the Canada Health and Social Transfer (CHST) and equalization programs.

• Direct program spending declined 5.6 per cent, primarily reflecting the timing of payments.

Public debt charges, on a year-over year basis, were slightly lower, reflecting a decline in the stock of interest-bearing debt.

April 2000 to February 2001: budgetary results

Over the first 11 months of fiscal year 2000-01, the budgetary surplus was estimated at $20.4 billion, up $5.5 billion from the surplus of $14.9 billion reported in the same period of 1999-2000.

Budgetary revenues were up $12.1 billion, or 8.1 per cent, on a year-over-year basis. Among the major revenue components:

Table 2
Budgetary revenues

• Personal income tax collections were up $4.3 billion, or 5.9 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 was the effect of the tax relief measures announced in the February 2000 budget and 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. Increases in the Canada Child Tax Benefit, up 18.5 per cent (reflecting increases to average benefits, which came into effect July 1, 2000, and the indexation of benefits), also served to restrain the overall growth in personal income tax revenues. Over the balance of the fiscal year, growth in personal income tax collections 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. In addition, recoveries from the Taxation Collection Accounts are not expected to be as large as in 1999-2000.

• Corporate income tax revenues were up $4.1 billion, or 19.5 per cent, in line with the estimated increase of 23.4 per cent in corporate profits for 2000.

• EI premium revenues were up $0.1 billion, or 0.7 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. The employee rate for 2001 is $2.25 per $100 of insurable earnings, compared to $2.40 in 2000 and $2.55 in 1999.

• Excise taxes and duties increased by $2.3 billion, or 7.5 per cent. Goods and services tax revenues were up $1.7 billion, or 8.1 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 $0.7 billion, or 12.9 per cent, primarily reflecting higher Bank of Canada profits and interest on bank balances.

Program spending increased by $6.6 billion, or 6.8 per cent, in the April 2000 to February 2001 period, compared to the same period in 1999-2000. Among the major components, major transfers to other levels of government were up $3.1 billion, major transfers to persons were up $1.8 billion, while direct program spending was up $1.6 billion.

Table 3
Budgetary expenditures

• The increase in major transfers to persons was attributable to the heating expense relief payment ($1.4 billion) and higher elderly benefits, up $0.8 billion, reflecting an increase in the number of individuals eligible for benefits and higher average benefits, which are indexed to inflation. EI benefit payments were down $0.4 billion, 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.

• 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 3.5 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 virtually unchanged, as the impact of the decline in the stock of interest-bearing debt was offset by an increase in the average effective interest rate on that debt.

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 $6.8 billion in the first 11 months of 2000-01, compared to a requirement of $2.3 billion in the same period in 1999-2000. This was attributable, in part, to 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 $20.4 billion and a net requirement of $6.8 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $13.5 billion in the April 2000 to February 2001 period, compared to a financial source of $12.5 billion in the same period in 1999-2000.

Table 4
The budgetary balance and financial requirements/source

Table 5
Net financial balance and net borrowings

Table 6
Condensed statement of assets and liabilities

Net financial source of $11.8 billion for April 2000 to February 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 $1.8 billion in the first 11 months of 2000-01, compared to a net requirement of $7.6 billion in the same period in 1999-2000.

With a budgetary surplus of $20.4 billion, a net requirement of $6.8 billion from non-budgetary transactions and a net requirement of $1.8 billion from foreign exchange transactions, there was a net financial source of $11.8 billion in the April 2000 to February 2001 period, compared to a net source of $5.0 billion in the same period in 1999-2000.

Net borrowings down $11.3 billion for April 2000 to February 2001

This financial source has allowed the Government to reduce its holding of market debt by $11.3 billion to the end of February 2001. In addition, cash balances increased by $0.5 billion to stand at $13.5 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.