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MNI POLICY: Canada Apr-Dec Budget Deficit Hits Record CAD248B

MNI (Ottawa)

Spending rose 86% over year-earlier period amid the pandemic.

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Canada's federal budget deficit widened to a record CAD248 billion from April to December, bringing it closer to the government's full fiscal year projection of CAD382 billion.

Program spending jumped by 86% or CAD198 billion from the year-earlier period, the finance department said Friday, and revenue fell 16%.

The monthly deficit for December was CAD16 billion compared with a surplus of CAD800 million a year ago.

"The government's 2020-21 financial results reflect the economic downturn and temporary measures implemented through the government's Economic Response Plan to support Canadians and businesses facing hardship as a result of the COVID-19 outbreak," the Fiscal Monitor report said.

Finance Minister Chrystia Freeland has said she will do whatever it takes to bring the economy out of the pandemic-induced recession, and has laid aside up to CAD100 billion of extra deficit spending beyond her projections to rebuild the economy. The government has also tied such goals to restoring all of the million jobs lost during the pandemic, while business groups and Parliament's budget officer say the money will come too late to be effective.

Canada's 2020 stimulus was worth about 20% of GDP according to IMF figures, the strongest of major economies, and is a factor that has allowed the Bank of Canada to start tapering its QE program. IMF staff earlier this month said future spending must be more focused on strengthening the economy and the government needs to better detail its path back towards fiscal restraint.

The government's April to December financial requirement, which reflects immediate cash needs, was CAD292 billion. The government is also sitting on a cash balance that's grown to CAD84 billion from CAD36 billion a year earlier, which it will likely to use to carry out relief programs.

The federal debt as of Dec. 31 stood at CAD974 billion.