The deficit represents a sharp increase compared to the same period of 2023
The Canadian government has increased its debt burden – and budget deficit - as spending on programs rose at a faster pace than tax and other revenues and debt charges increased.
Figures for the period from April to July 2024 show a 13.5% increase in federal program expenses to $17.5 billion excluding net actuarial losses, mostly due to increased direct program expenses, major transfers to provincial and other governments, and transfers to persons.
Elderly benefits, EI benefits, COVID-19 income support for workers, and children's benefits, were up $1.2 billion (12.7%).
Meanwhile, revenues increased by 10.2% to $14.2 billion with all major revenue sources showing increases. Tax revenues were up 8.7% or $10.5 billion driven by corporate and personal income tax revenue. For July alone, tax revenues gained 12.9% or $3.8 billion.
The cost of public debt also increased, by $4.2 billion (28.8%) mostly due to higher interest charges on marketable bonds and treasury bills.
Net actuarial losses were down 23.2% or $800 million, largely reflecting the amortization of gains arising from actuarial valuations prepared for the Public Accounts of Canada 2023.
Increased deficit and debt
The federal budget deficit increased in the April-July period of FY2024/25 to $7.3 billion, a sharp rise from the $1.2 billion deficit of the same period of one year earlier. Before net actuarial losses, the deficit was $4.8 billion versus a surplus of $2.0 billion in the prior year.
The Department of Finance’s Fiscal Monitor reveals that Employment Insurance revenues in the period were up by $1.1 billion (31.8%), pollution pricing proceeds to be returned to Canadians were up $1.0 billion (31.8%), and other revenues gained $2.3 billion (18.5%).
With a financial requirement of $47 billion and the government also increasing cash balances by $4.9 billion (to $71.6 billion by the end of July 2024), financed by increasing unmatured debt to $52 billion, mostly achieved through issuance of treasury bills and marketable bonds.
Rising budget deficits have been causing concern in several major economies.
Jim Thorne, chief market strategist with Wellington Altus Private Wealth told WP that when advisors look at the landscape of the US and Canadian economies now, they should be cognizant of the role deficits can play because they may set the stage for the next major market correction.
