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- Fiscal Monitor 2003 -
The Fiscal Monitor
Highlights of financial results for February 2003
Highlights
February 2003: budgetary surplus of $3.6 billion
There was a budgetary surplus of $3.6 billion in February 2003, down $0.6 billion from the surplus of $4.2 billion in February 2002. A large surplus was expected in February, as these results include the final corporate income tax settlement payments from corporations whose taxation year ends on December 31. On a year-over-year basis, budgetary revenues increased by $0.3 billion, or 1.9 per cent, program spending increased by $1.1 billion, or 11.6 per cent, while public debt charges declined by $0.2 billion, or 5.0 per cent.
April 2002 to February 2003: budgetary surplus of $14.8 billion
The budgetary surplus was estimated at $14.8 billion for the April 2002 to February 2003 period, down $4.7 billion from the surplus of $19.5 billion reported in the same period of 2001–02. The decline in the year-over-year surplus is largely attributable to developments affecting personal and corporate income tax revenues with respect to the 2001 tax year. This deterioration reflects the decline in the stock market in 2001, which resulted in higher refunds and lower settlement payments in April and May 2002, and higher corporate income tax refunds and lower final settlement payments, as corporations are applying losses experienced in 2001 to taxes paid in previous years or owing in 2002.
The monthly financial results are presented on a modified accrual basis of accounting. The Budget 2003 estimate for the year as a whole was presented on a full accrual basis of accounting. Taking into consideration the normal fiscal developments over the balance of the year, the accounting differences and the impact of the policy initiatives for 2002–03 proposed in the budget, including the $2.5-billion Canada Health and Social Transfer (CHST) supplement, the $1.5-billion Diagnostic/Medical Equipment Fund, $0.6 billion for health information technology and $0.5 billion to the Canada Foundation for Innovation, the results to date are consistent with the expected outcome for 2002–03 as set out in Budget 2003. The Fiscal Monitor will present monthly results on a full accrual basis beginning with the April 2003 Monitor. | ![Monthly surplus and deficit - 2003-04_1e.gif ( 5,479 bytes)](/web/20061130052540im_/http://www.fin.gc.ca/FISCMON/images/2003-02_1e.gif)
![Revenue and expenditures - 2003-04_2e.gif (9,018 bytes)](/web/20061130052540im_/http://www.fin.gc.ca/FISCMON/images/2003-02_2e.gif)
Table 1 Summary statement of transactions
|
|
February |
April to February |
|
2002 |
2003 |
2001–02 |
2002–03 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
16,866 |
17,194 |
162,505 |
161,300 |
Program spending |
-9,617 |
-10,736 |
-107,701 |
-114,303 |
|
|
|
Operating surplus |
7,249 |
6,458 |
54,804 |
46,998 |
Public debt charges |
-3,022 |
-2,872 |
-35,302 |
-32,231 |
|
|
|
Budgetary balance (deficit/surplus) |
4,227 |
3,586 |
19,502 |
14,766 |
Non-budgetary transactions |
-1,389 |
-365 |
-16,134 |
-15,380 |
Financial requirements/source
(excluding foreign exchange transactions) |
2,838 |
3,221 |
3,368 |
-614 |
Foreign exchange transactions |
-626 |
3,042 |
-1,117 |
4,332 |
|
|
|
Net financial balance |
2,212 |
6,263 |
2,251 |
3,718 |
Net change in borrowings |
3,322 |
-5,143 |
-5,457 |
-9,726 |
Net change in cash balances |
5,534 |
1,120 |
-3,206 |
-6,008 |
Cash balance at end of period |
|
|
9,974 |
5,940 |
Note: Positive numbers
indicate a net source of funds. Negative numbers indicate a net
requirement for funds.
Estimates for 2001–02 have been revised from those previously
published. |
|
February 2003: budgetary results
On a year-over-year basis, the budgetary surplus declined by $0.6 billion to $3.6 billion in February 2003.
Budgetary revenues increased by $0.3 billion, or 1.9 per cent. Among the various revenue components:
- Corporate income tax revenues were down $0.9 billion, or 18.7 per
cent, primarily reflecting the application of losses incurred
in 2001, thereby reducing taxes owing with respect to the 2002 tax
year.
- Employment insurance (EI) premium revenues were up $0.1 billion, or
7.7 per cent, as the impact of the growth in the number of people
employed and therefore paying premiums more than offset the effect
of the decline in premium rates (the employee rate for 2003 is
$2.10 per $100 of insurable earnings compared to
$2.20 in 2002).
- Excise taxes and duties were up $0.3 billion, or 9.5 per cent, as
higher goods and services tax (GST) revenues and other excise taxes
and duties, as well as the introduction of the Air Travellers
Security Charge, more than offset a decline in customs import
duties.
- Non-tax revenues were down slightly on a year-over-year basis.
On a year-over-year basis, program spending was up $1.1 billion, or 11.6 per cent.
- Transfers to persons increased $0.2 billion, or 5.3 per cent, due to
both higher EI and elderly benefits. The increase in EI benefits
reflects the timing of payments, reversing the year-over-year decline in
January.
- Transfers to other levels of government were up $0.1 billion, or 6.5
per cent, primarily reflecting higher cash transfers under the CHST.
This increase reflects the September 2000 agreement reached by first
ministers to increase base funding from $17.3 billion in 2001–02 to
$18.6 billion in 2002–03.
Table 2 Budgetary revenues
|
|
February | | April to February | | | 2002 | 2003 | Change | 2001–02 | 2002–03 | Change | | | ($ millions) | (%) | ($ millions) | (%) | Income taxes | | | | | | | Personal income tax | 6,142 | 6,862 | 11.7 | 77,532 | 74,980 | -3.3 | Corporate income tax | 4,903 | 3,986 | -18.7 | 23,365 | 19,388 | -17.0 | Other income tax revenue | 175 | 302 | 72.6 | 3,383 | 3,726 | 10.1 | | | | Total income tax | 11,220 | 11,150 | -0.6 | 104,280 | 98,094 | -5.9 | Employment insurance premium revenues | 1,815 | 1,955 | 7.7 | 16,186 | 16,428 | 1.5 | Excise taxes and duties | | | | | | | Goods and services tax | 2,028 | 2,277 | 12.3 | 23,693 | 27,299 | 15.2 | Customs import duties | 328 | 268 | -18.6 | 2,760 | 2,931 | 6.2 | Other excise taxes and duties | 642 | 697 | 8.6 | 7,941 | 8,633 | 8.7 | Air Travellers Security Charge | | 42 | | | 337 | | | | | Total excise taxes and duties | 2,998 | 3,284 | 9.5 | 34,394 | 39,200 | 14.0 | | | | Total tax revenues | 16,033 | 16,389 | 2.2 | 154,860 | 153,722 | -0.7 | Non-tax revenues | 833 | 805 | -3.2 | 7,645 | 7,578 | -0.9 | | | | Total budgetary revenues | 16,866 | 17,194 | 1.9 | 162,505 | 161,300 | -0.7 | | - Direct program spending, consisting of total program spending less transfers to persons and other levels of government, was up $0.8 billion, or 20.0 per cent. Nearly half of this increase was attributable to higher transfers to the Crop Reinsurance Fund. The monthly fluctuations in this component are due in large part to the timing of payments.
Public debt charges, on a year-over-year basis, declined $0.2 billion, or
5.0 per cent, due to a decline in the stock of interest-bearing debt as
well as a lower average effective interest rate on that debt.
April 2002 to February 2003: budgetary results
Over the first 11 months of fiscal year 2002–03, the budgetary surplus was estimated at $14.8 billion, compared to a surplus of $19.5 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.
Over the first 11 months of 2002–03, budgetary revenues were down $1.2 billion, or 0.7 per cent, on a year-over-year basis. Among the major components:
- Personal income tax collections were down $2.6 billion, or 3.3
per cent. Virtually all of this decline is attributable to
lower final tax payments and higher refunds with respect to
the 2001 tax year, reflecting weakness in the stock market and the
associated lower net capital gains realizations. Quarterly instalment
payments were also lower, as these payments are now largely based on tax
liabilities for 2001. However, it should be noted that the results for
the same period in 2001 were affected by the extraordinary stock market
gains in 2000, which resulted in record final tax settlement payments in
April and May 2001. On a full accrual basis of accounting, these impacts
will be recorded in the year in which the taxable activity took place.
The results to date were also dampened by the impact of the tax
reduction measures announced in the February 2000 budget and October
2000 Economic Statement and Budget Update. Partially offsetting
these impacts were higher taxes associated with increases in employment
income.
Table 3 Budgetary expenditures
|
|
February |
|
April to February |
|
|
2002 |
2003 |
Change |
2001–02 |
2002–03 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
2,140 |
2,233 |
4.3 |
23,207 |
24,106 |
3.9 |
Employment insurance
benefits |
1,282 |
1,372 |
7.0 |
12,373 |
13,018 |
5.2 |
Total |
3,422 |
3,605 |
5.3 |
35,580 |
37,124 |
4.3 |
Other levels of government |
|
|
|
|
|
|
Canada Health and Social
Transfer |
1,442 |
1,550 |
7.5 |
15,858 |
17,050 |
7.5 |
Fiscal transfers |
1,036 |
1,052 |
1.5 |
11,433 |
11,484 |
0.4 |
Alternative Payments for |
|
|
|
|
|
|
Standing Programs |
-233 |
-210 |
-9.9 |
-2,331 |
-2,312 |
-0.8 |
Total |
2,245 |
2,392 |
6.5 |
24,960 |
26,222 |
5.1 |
Direct program spending |
|
|
|
|
|
|
Subsidies and other transfers |
|
|
|
|
|
|
Agriculture |
106 |
505 |
376.4 |
715 |
1,200 |
67.8 |
Foreign Affairs |
155 |
230 |
48.4 |
1,565 |
1,515 |
-3.2 |
Health |
95 |
104 |
9.5 |
1,170 |
1,348 |
15.2 |
Human Resources
Development |
167 |
106 |
-36.5 |
1,546 |
1,313 |
-15.1 |
Indian and Northern
Development |
245 |
308 |
25.7 |
3,600 |
3,697 |
2.7 |
Industry and Regional
Development |
138 |
107 |
-22.5 |
1,322 |
1,589 |
20.2 |
Veterans Affairs |
134 |
145 |
8.2 |
1,402 |
1,555 |
10.9 |
Other |
153 |
136 |
-11.1 |
2,235 |
2,310 |
3.4 |
Total |
1,193 |
1,641 |
37.6 |
13,555 |
14,527 |
7.2 |
Payments to Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting
Corporation |
50 |
80 |
60.0 |
966 |
994 |
2.9 |
Canada Mortgage and
Housing
Corporation |
75 |
170 |
126.7 |
1,755 |
1,748 |
-0.4 |
Other |
86 |
221 |
157.0 |
1,671 |
1,877 |
12.3 |
Total |
211 |
471 |
123.2 |
4,392 |
4,619 |
5.2 |
Operating and capital expenditures |
|
|
|
|
|
|
Defence |
681 |
792 |
16.3 |
8,502 |
8,777 |
3.2 |
All other departmental
expenditures |
1,865 |
1,835 |
-1.6 |
20,712 |
23,034 |
11.2 |
Total |
2,546 |
2,627 |
3.2 |
29,214 |
31,811 |
8.9 |
Total direct program spending |
3,950 |
4,739 |
20.0 |
47,161 |
50,957 |
8.0 |
Total program expenditures |
9,617 |
10,736 |
11.6 |
107,701 |
114,303 |
6.1 |
Public debt charges |
3,022 |
2,872 |
-5.0 |
35,302 |
32,231 |
-8.7 |
Total budgetary expenditures |
12,639 |
13,608 |
7.7 |
143,003 |
146,534 |
2.5 |
Memorandum item:
Total transfers |
6,860 |
7,638 |
11.3 |
74,095 |
77,873 |
5.1 |
|
- Corporate income tax revenues were down $4.0 billion, or 17.0 per
cent. This is primarily attributable to higher refunds pertaining to
previous years’ taxes paid and lower taxes paid in the February 2003
settlement period, as a number of corporations reduced their 2002 tax
liability by applying losses incurred in 2001.
- EI premium revenues were up $0.2 billion, 1.5 per cent, as the
impact of lower premium rates was more than offset by the impact of
increases in employment and, therefore, more people paying premiums.
- Excise taxes and duties increased by $4.8 billion, or 14.0 per
cent, primarily reflecting higher GST revenues, customs import duties
and tobacco excise taxes and duties, as well as the introduction of
the Air Travellers Security Charge. GST revenues were up 15.2 per
cent compared to an increase in the applicable tax base—consumer
expenditures—of about 6 per cent. Although the growth in gross GST
revenues is broadly in line with the increase in the applicable tax
base, refunds are virtually unchanged from the same period last
year.
- Non-tax revenues were down 0.9 per cent from the same period last
year.
Over the first 11 months of 2002–03, program spending increased by $6.6 billion, or 6.1 per cent, compared to the same period of 2001–02.
- Transfers to persons were up $1.5 billion, or 4.3 per cent,
reflecting both higher elderly and EI benefits. The increase in elderly
benefits reflects the increase in the number of people eligible to
receive benefits as well as higher average benefits, which are adjusted
quarterly to reflect changes in consumer prices. The increase in EI
benefits is attributable to the lagged effects of the economic slowdown
in 2001 and the impact of program enhancements, including
the extension of and related changes to parental benefits.
- Transfers to other levels of government were up $1.3 billion, or
5.1 per cent, due 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 $3.8 billion, or 8.0 per
cent. Subsidies and other transfers were up 7.2 per cent, primarily due
to higher payments to farmers and veterans as well as increased
transfers to the granting councils for university research activities.
Payments to Crown corporations were up 5.2 per cent. Departmental
and agency operating and capital spending was up 8.9 per cent, in part
due to the implementation of initiatives announced in the December
2001 budget.
Public debt charges declined by $3.1 billion, or 8.7 per cent, reflecting a decline in the stock of interest-bearing debt as well as a lower average effective interest rate on that debt.
Financial requirement of $0.6 billion (excluding foreign exchange
transactions) for April 2002 to February 2003
The budgetary balance in The Fiscal Monitor 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 $15.4 billion in the first 11 months of 2002–03, compared to a net requirement of $16.1 billion in the same period of 2001–02.
As a result, with a budgetary surplus of $14.8 billion and a net requirement of $15.4 billion from non-budgetary transactions, there was a financial requirement (excluding foreign exchange transactions) of $0.6 billion in the April 2002 to February 2003 period, compared to a source of $3.4 billion in the same period of 2001–02.
Table 4 The budgetary balance and financial requirements/source
|
|
February |
April to February |
|
2002 |
2003 |
2001–02 |
2002–03 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
4,227 |
3,586 |
19,502 |
14,766 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
7 |
0 |
551 |
354 |
Other |
182 |
310 |
-1,157 |
-1,027 |
|
|
|
Total |
189 |
310 |
-606 |
-673 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan
Account |
1,032 |
915 |
-689 |
-10 |
Superannuation accounts |
-194 |
61 |
-2,408 |
-552 |
Other |
91 |
-49 |
197 |
116 |
|
|
|
Total |
929 |
927 |
-2,900 |
-446 |
Other transactions |
-2,507 |
-1,602 |
-12,629 |
-14,261 |
|
|
|
Total non-budgetary transactions |
-1,389 |
-365 |
-16,134 |
-15,380 |
|
|
|
|
|
Financial
requirements/source
(excluding foreign exchange transactions) |
2,838 |
3,221 |
3,368 |
-614 |
Foreign exchange transactions |
-626 |
3,042 |
-1,117 |
4,332 |
|
|
|
Net financial balance |
2,212 |
6,263 |
2,251 |
3,718 |
|
Table 5 Net financial balance and net borrowings
|
|
February |
April to February |
|
2002 |
2003 |
2001–02 |
2002–03 |
|
|
($ millions) |
Net financial balance |
2,212 |
6,263 |
2,251 |
3,718 |
Net increase (+)/decrease (-)
in
borrowings |
|
|
|
|
Payable in Canadian
dollars |
|
|
|
|
Marketable
bonds |
2,982 |
1,190 |
-2,515 |
-8,127 |
Canada
Savings Bonds |
-133 |
-96 |
-2,870 |
-1,797 |
Treasury
bills |
600 |
-3,050 |
5,700 |
5,750 |
Other |
-17 |
– |
-63 |
19 |
Total |
3,432 |
-1,956 |
252 |
-4,193 |
Payable in foreign
currencies |
|
|
|
|
Marketable
bonds |
0 |
-3,188 |
-1,576 |
-4,768 |
Notes
and loans |
0 |
|
-514 |
|
Canada
bills |
48 |
1 |
-3,288 |
-765 |
Canada
notes |
-158 |
0 |
-331 |
0 |
Total |
-110 |
-3,187 |
-5,709 |
-5,533 |
Net change in borrowings |
3,322 |
-5,143 |
-5,457 |
-9,726 |
Change in cash balance |
5,534 |
1,120 |
-3,206 |
-6,008 |
|
Net financial source of $3.7 billion for April 2002 to
February 2003
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 source of $4.3 billion in the first 11 months of 2002–03, compared to a net requirement of $1.1 billion in the same period of 2001–02.
With a budgetary surplus of $14.8 billion, a net requirement of $15.4 billion from non-budgetary transactions and a net source of $4.3 billion from foreign exchange transactions, there was a net financial source of $3.7 billion in the April 2002 to February 2003 period, compared to a net source of $2.3 billion in the same period of 2001–02.
Net borrowings down $9.7 billion for April 2002 to February
2003
With this net financial source of $3.7 billion and a reduction in cash balances of $6.0 billion, the Government reduced its net borrowings by $9.7 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.
Note to readers:
The Government has implemented full accrual accounting in its annual financial statements. However, the monthly financial results for the balance of fiscal year 2002–03 will remain on a modified accrual basis of accounting. Until the monthly results are on full accrual, Table 6 "Condensed statement of assets and liabilities" will not be presented. |