Canada reported its largest monthly budget surplus since the pandemic took hold, further evidence the economy is running full tilt again as the government plans to keep boosting spending.
The February surplus was CAD5.5 billion versus a deficit of CAD14.4 billion a year earlier, according to the Finance Department's Fiscal Monitor report released Friday. Revenue climbed 48% from a year earlier as the economic recovery boosted taxes and program spending fell 14% on decreased Covid benefits like wage subsidies.
The deficit for the fiscal year from April of last year through February was CAD69.8 billion, down from CAD283 billion in the previous period. The government's cash stockpile climbed to CAD83.8 billion from CAD68.3 billion.
Finance Minister Chrystia Freeland presented a budget April 7, spending more than half the windfall from the economic rebound. Former Revenue Minister Perrin Beatty told MNI deficits clash with a central bank raising interest rates and businesses will suffer as borrowing costs and inflation rise. (See: MNI Interview:Canada Budget Clashes With BOC Tightening-Beatty)
The budget projected a CAD52.8 billion deficit for the fiscal year that opened April 1, equal to 2% of GDP, and shortfalls through the projection period ending in 2026-27. Federal debt as a percentage of GDP, the lone "fiscal anchor" the government has stuck to since taking power in 2015, declines from 45.1% to 41.5% over this time, remaining above the pre-Covid level of 31.2%.
The budget said the deficit for the fiscal year that ended in March was CAD113.8 billion, and end-of-year adjustments often bring the monthly fiscal numbers more in line with budget estimates.
Source: Finance Department