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- Fiscal Monitor 2001 -
The Fiscal Monitor
Highlights of financial results for December 2001
Highlights
December 2001: budgetary surplus of $1.5 billion
There was a budgetary surplus of $1.5 billion in December 2001, $1.9 billion lower than the surplus of $3.3 billion reported in December 2000. On a year-over-year basis, budgetary revenues were $0.6 billion lower, primarily attributable to lower corporate income tax revenues, reflecting the weakness in corporate profits. Program spending was $1.5 billion higher, largely attributable to higher employment insurance (EI) benefits and to higher departmental operating and capital expenditures in response to the events of September 11th. Public debt charges declined by $0.3 billion, primarily reflecting the decline in interest rates. Given the monthly pattern of budgetary revenues, a surplus was expected in December.
April 2001 to December 2001: budgetary surplus of $13.4 billion
The budgetary surplus was estimated at $13.4 billion for the April 2001 to December 2001 period, down $5.4 billion from the surplus of $18.8 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 the December 2001 budget. In addition, the effect of the slowing economy on most of the major revenue components and EI benefits is also adversely affecting the fiscal results, compared to the same period last year. The results to date are consistent with the expected results for the year as a whole as outlined in the December 2001 budget. | December 2001: budgetary results Budgetary revenues declined $0.6 billion, or 3.9 per cent, on a
year-over-year basis, primarily attributable to lower corporate
income tax revenues.
- Personal income tax revenues were marginally higher. The overall
growth has been restrained by the slowdown in the economy, the
impact of the tax reduction measures announced in
the February 2000 budget and October 2000 Economic Statement and
Budget Update, and enrichments to the Canada Child Tax Benefit
announced in previous budgets.
- Corporate income tax revenues declined $0.7 billion, or 28.9 per cent, reflecting the much lower profit outcome for 2001 compared
to 2000, as well as the tax rate reductions effective January 1, 2001.
- EI premium revenues declined 1.2 per cent, primarily reflecting the
impact of lower premium rates (the employee rate for 2001 is $2.25 per
$100 of insurable earnings compared to $2.40 in 2000).
- Excise taxes and duties increased $0.2 billion, or 9.0 per cent,
recovering some of the decline reported in November. Increases were
reported in all components. The increases in goods and services
tax (GST) revenues and customs import duties partly reflect recoveries
from delays in processing import goods associated with the events of
September 11th. Higher federal taxes on tobacco products, effective
November 2, 2001, contributed to the increase in sales and excises
taxes.
- Non-tax revenues declined 24.5 per cent, largely reflecting the
impact of lower interest rates.
Table 1 Summary statement of transactions
|
|
December |
April
to December |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
16,310 |
15,680 |
131,618 |
131,229 |
Program spending |
-9,515 |
-11,016 |
-81,751 |
-88,175 |
Operating surplus |
6,795 |
4,664 |
49,867 |
43,054 |
Public debt charges |
-3,486 |
-3,206 |
-31,024 |
-29,612 |
Budgetary balance (deficit/surplus) |
3,309 |
1,458 |
18,843 |
13,442 |
Non-budgetary transactions |
-5,620 |
-3,067 |
-9,691 |
-13,992 |
Financial requirements/source (excluding foreign
exchange transactions) |
-2,311 |
-1,609 |
9,152 |
-550 |
Foreign exchange transactions |
609 |
-142 |
-1,323 |
-643 |
Net financial balance |
-1,702 |
-1,751 |
7,829 |
-1,193 |
Net change in borrowings |
-6,870 |
-6,858 |
-16,616 |
-6,997 |
Net change in cash balances |
-8,572 |
-8,609 |
-8,787 |
-8,190 |
Cash balance at end of period |
|
|
4,167 |
4,992 |
|
Note: Positive numbers indicate a net source of funds. Negative
numbers indicate a net requirement for funds. |
Program spending increased by $1.5 billion, or 15.8 per cent, on a year-over-year basis. Most of the increase is attributable to higher EI benefits and increased departmental operating and capital expenditures.
- Major transfers to persons were up $0.7 billion, or 24.1 per cent,
reflecting both higher elderly and EI benefit payments. The
increase in EI benefit payments reflects the impact
of benefit enhancements announced in the February 2000 budget and
in September 2000, as well as an increase in the number of
beneficiaries due to the slowdown in the economy.
- Major transfers to other levels of government were up $0.1 billion,
or 6.8 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. The decline in fiscal transfers
is attributable to the timing of payments.
- Direct program spending, consisting of total program spending
less major transfers to persons and other levels of government,
increased $0.6 billion, or 14.5 per cent, attributable to incremental
spending related to the response to the events of September 11th.
Public debt charges, on a year-over year basis, were down $0.3 billion, or 8.0 per cent, due primarily to the decline in the average effective interest rate on the debt.
April 2001 to December 2001: budgetary results
Over the first nine months of fiscal year 2001-02, the budgetary surplus was estimated at $13.4 billion, down $5.4 billion from the surplus reported in the same period of 2000-01. Program spending was up $6.4 billion while budgetary revenues were down $0.4 billion. Dampening the impact of these factors on the budgetary balance were lower public debt charges, down $1.4 billion.
Table 2 Budgetary revenues
|
|
December |
|
April to December |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%)
|
Income taxes |
|
|
|
|
|
|
Personal income tax |
9,149 |
9,191 |
0.5 |
64,139 |
64,536 |
0.6 |
Corporate income tax |
2,432 |
1,728 |
-28.9 |
17,512 |
16,812 |
-4.0 |
Other income tax revenue |
283 |
311 |
9.9 |
2,348 |
2,653 |
13.0 |
Total income tax |
11,864 |
11,230 |
-5.3 |
83,999 |
84,001 |
0.0 |
Employment insurance premium revenues |
964 |
952 |
-1.2 |
13,586 |
12,998 |
-4.3 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
1,773 |
1,815 |
2.4 |
19,115 |
19,190 |
0.4 |
Customs import duties |
202 |
295 |
46.0 |
2,074 |
2,246 |
8.3 |
Sales and excise taxes |
620 |
718 |
15.8 |
6,309 |
6,581 |
4.3 |
Total excise taxes and duties |
2,595 |
2,828 |
9.0 |
27,498 |
28,017 |
1.9 |
Total tax revenues |
15,423 |
15,010 |
-2.7 |
125,083 |
125,016 |
-0.1 |
Non-tax revenues |
887 |
670 |
-24.5 |
6,535 |
6,213 |
-4.9 |
Total budgetary revenues |
16,310 |
15,680 |
-3.9 |
131,618 |
131,229 |
-0.3 |
|
Among the major components of budgetary revenues, on a year-over-year basis:
- Personal income tax collections increased marginally, as higher
final tax payments received in April and May with respect to the 2000
taxation year and the effect of prior-year adjustments affecting the
October 2000 results offset the impact of the tax reduction measures
announced in the February 2000 budget and October 2000 Economic
Statement and Budget Update.
- Corporate income tax revenues declined 4.0 per cent,
reflecting the impact of both lower corporate profits and
reductions in tax rates. Large year-over-year declines are
expected over the balance of the fiscal year, attributable
to lower final settlement payments, reflecting the decline in
corporate profits in 2001 and the December 2001 budget decision
to allow small businesses to defer payments of their
corporate income tax instalments for the months of January,
February and March 2002.
- EI premium revenues were down 4.3 per cent, as the impact of
prior-year adjustments, which affected the October 2000 results,
coupled with 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 $0.5 billion, or 1.9 per cent. GST
revenues were up marginally, customs import duties were up
8.3 per cent, while sales and excise taxes were up 4.3 per
cent.
- Non-tax revenues were down 4.9 per cent.
Among the major components of program spending, on a year-over-year basis:
- Transfers to persons were up 10.8 per cent, attributable to higher
elderly and EI benefit payments. The increase in elderly benefit
payments reflects an increase in the number of individuals
eligible for benefits and higher average benefits, which are indexed
to inflation. The increase in EI benefit payments primarily reflects
the impact of program enhancements, as well as an increase in the
number of beneficiaries.
Table 3 Budgetary expenditures
|
|
December |
|
April
to December |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
2,038 |
2,151 |
5.5 |
18,079 |
18,926 |
4.7 |
Employment insurance benefits |
902 |
1,497 |
66.0 |
7,618 |
9,543 |
25.3 |
Total |
2,940 |
3,648 |
24.1 |
25,697 |
28,469 |
10.8 |
Other levels of
government |
|
|
|
|
|
|
Canada Health and
Social Transfer |
1,125 |
1,442 |
28.2 |
10,125 |
12,975 |
28.1 |
Fiscal transfers |
1,194 |
1,048 |
-12.2 |
9,021 |
9,363 |
3.8 |
Medical Equipment Fund |
|
|
|
1,000 |
|
|
Alternative Payments for |
|
|
|
|
|
|
Standing Programs |
-206 |
-233 |
13.1 |
-1,850 |
-1,865 |
0.8 |
Total |
2,113 |
2,257 |
6.8 |
18,296 |
20,473 |
11.9 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
97 |
41 |
-57.7 |
383 |
56647.8 |
|
Foreign Affairs |
122 |
169 |
38.5 |
1,024 |
1,169 |
14.2 |
Health |
80 |
79 |
-1.3 |
819 |
929 |
13.4 |
Human Resources Development |
208 |
103 |
-50.5 |
815 |
1,008 |
23.7 |
Indian and Northern Development |
306 |
323 |
5.6 |
3,267 |
3,055 |
-6.5 |
Industry and Regional Development |
192 |
155 |
-19.3 |
1,013 |
1,113 |
9.9 |
Veterans Affairs |
119 |
130 |
9.2 |
1,078 |
1,130 |
4.8 |
Other |
198 |
234 |
18.2 |
1,576 |
1,873 |
18.8 |
Total |
1,322 |
1,234 |
-6.7 |
9,975 |
10,843 |
8.7 |
Payments to Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting Corporation |
103 |
133 |
29.1 |
778 |
851 |
9.4 |
Canada mortgage and
Housing Corporation |
150 |
233 |
55.3 |
1,370 |
1,522 |
11.1 |
Other |
190 |
135 |
-28.9 |
1,137 |
1,223 |
7.6 |
Total |
443 |
501 |
13.1 |
3,285 |
3,596 |
9.5 |
Operating and capital expenditures |
|
|
|
|
|
|
Defence |
814 |
1,089 |
33.8 |
7,648 |
8,085 |
5.7 |
All other departmental
expenditures |
1,883 |
2,287 |
21.5 |
16,850 |
16,709 |
-0.8 |
Total |
2,697 |
3,376 |
25.2 |
24,498 |
24,794 |
1.2 |
Total direct program spending |
4,462 |
5,111 |
14.5 |
37,758 |
39,233 |
3.9 |
Total program expenditures |
9,515 |
11,016 |
15.8 |
81,751 |
88,175 |
7.9 |
Public debt charges |
3,486 |
3,206 |
-8.0 |
31,024 |
29,612 |
-4.6 |
Total budgetary expenditures |
13,001 |
14,222 |
9.4 |
112,775 |
117,787 |
4.4 |
Memorandum item:
Total transfers |
6,375 |
7,139 |
12.0 |
53,968 |
59,785 |
10.8 |
|
- Major transfers to other levels of government were up 11.9 per cent,
reflecting higher cash transfers under the CHST and fiscal transfer
programs. 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 increase in fiscal transfers is primarily due to higher
equalization entitlements.
- Direct program spending, consisting of total program spending
less major transfers to persons and other levels of government,
increased 3.9 per cent. Developments in this component are largely
affected by the timing of payments as well as the full
implementation of the new Financial Information Strategy.
The introduction of the new system has resulted in a change in
the monthly profile of spending. This will result in a larger portion
of spending being recorded in the second half of the year than that
recorded in previous years.
The year-over-year decline in public debt charges of $1.4 billion reflects the impact of declines in both the stock of interest-bearing debt and the average effective interest rate on that debt.
Financial requirement of $0.6 billion (excluding foreign exchange
transactions) for April 2001 to December 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 $14.0 billion in the first nine months of 2001-02, compared to a net requirement of $9.7 billion in the same period in 2000-01. The increase to date is attributable to transfers of applicable pension assets to those Crown corporations setting up their own pension plans and higher transfers to the Canada Pension Plan Account.
As a result, with a budgetary surplus of $13.4 billion and a net requirement of $14.0 billion from non-budgetary transactions, there was a financial requirement (excluding foreign exchange transactions) of $0.6 billion in the April 2001 to December 2001 period, compared to a source of $9.2 billion in the same period of 2000-01.
Net financial requirement of $1.2 billion for April 2001 to
December 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 $0.6 billion in the first nine months of 2001-02, compared to a net requirement of $1.3 billion in the same period in 2000-01.
Table 4 The budgetary balance and financial requirements/source
|
|
December |
April
to December |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
3,309 |
1,458 |
18,843 |
13,442 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
40 |
70 |
348 |
499 |
Other |
28 |
-199 |
-843 |
-1,131 |
Total |
68 |
-129 |
-495 |
-632 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
-497 |
-94 |
-524 |
-2,041 |
Superannuation accounts |
-152 |
44 |
1,554 |
-1,508 |
Other |
-8 |
-21 |
-48 |
57 |
Total |
-657 |
-71 |
982 |
-3,492 |
Other transactions |
-5,031 |
-2,867 |
-10,178 |
-9,868 |
Total non-budgetary transactions |
-5,620 |
-3,067 |
-9,691 |
-13,992 |
Financial requirements/source (excluding foreign exchange
transactions) |
-2,311 |
-1,609 |
9,152 |
-550 |
Foreign exchange transactions |
609 |
-142 |
-1,323 |
-643 |
Net financial balance |
-1,702 |
-1,751 |
7,829 |
-1,193 |
|
Table 5 Net financial balance and net borrowings
|
|
December |
April
to December |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Net financial balance |
-1,702 |
-1,751 |
7,829 |
-1,193 |
Net increase (+)/decrease (-) in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable bonds |
-7,130 |
-6,663 |
8,319 |
-5,860 |
Treasury bills |
-400 |
800 |
-21,150 |
6,300 |
Canada Savings Bonds |
20 |
-107 |
-1,204 |
-2,618 |
Other |
-133 |
-1 |
-95 |
-22 |
Total |
-7,643 |
-5,971 |
-14,130 |
-2,200 |
Payable in foreign currencies |
|
|
|
|
Marketable bonds |
0 |
0 |
-2,202 |
-1,576 |
Notes and loans |
|
|
|
-41 |
Canada bills |
773 |
-887 |
-248 |
-3,007 |
Canada notes |
0 |
0 |
-36 |
-173 |
Total |
773 |
-887 |
-2,486 |
-4,797 |
Net change in borrowings |
-6,870 |
-6,858 |
-16,616 |
-6,997 |
Change in cash balance |
-8,572 |
-8,609 |
-8,787 |
-8,190 |
|
Table 6 Condensed statement of assets and liabilities
|
|
March 31, 2001 |
December 31, 2001 |
Change |
|
|
($ millions) |
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
43,644 |
31,518 |
-12,126 |
Interest-bearing debt |
|
|
|
Pension and other accounts |
|
|
|
Public sector pensions |
129,185 |
127,677 |
-1,508 |
Canada Pension Plan
(net of securities) |
6,391 |
4,350 |
-2,041 |
Other pension and
other accounts |
7,253 |
7,310 |
57 |
Total pension and
other accounts |
142,829 |
139,337 |
-3,492 |
Unmatured debt |
|
|
|
Payable in Canadian dollars |
|
|
|
Marketable bonds |
294,973 |
289,113 |
-5,860 |
Treasury bills |
88,700 |
95,000 |
6,300 |
Canada Savings Bonds |
26,099 |
23,481 |
-2,618 |
Other |
3,473 |
3,451 |
-22 |
Subtotal |
413,245 |
411,045 |
-2,200 |
Payable in foreign currencies |
33,158 |
28,361 |
-4,797 |
Total unmatured debt |
446,403 |
439,406 |
-6,997 |
Total interest-bearing debt |
589,232 |
578,744 |
-10,488 |
Total liabilities |
632,876 |
610,262 |
-22,614 |
Assets |
|
|
|
Cash and accounts receivable |
19,186 |
8,739 |
-10,447 |
Foreign exchange accounts |
50,270 |
50,913 |
643 |
Loans, investments and advances (net of allowances) |
16,042 |
16,674 |
632 |
Total assets |
85,498 |
76,326 |
-9,172 |
Accumulated deficit (net public debt) |
547,378 |
533,936 |
-13,442 |
|
With a budgetary surplus of $13.4 billion, a net requirement of $14.0 billion from non-budgetary transactions and a net requirement of $0.6 billion from foreign exchange transactions, there was a net financial requirement of $1.2 billion in the April 2001 to December 2001 period, compared to a net source of $7.8 billion in the same period in 2000-01.
Net borrowings down $7.0 billion for April 2001 to December
2001
Although there was a net financial requirement of $1.2 billion in the first nine months of 2001-02, the Government did reduce its holding of market debt by $7.0 billion through the drawing down of cash balances. 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 December 2001 they stood at $5.0 billion, down $8.2 billion from March 31, 2001. |