Canada's budget deficit narrowed to CAD3.9 billion in July from CAD10.9 billion a year earlier as a major Covid income support program ended, continuing the surprisingly strong run of finances amid one of the fastest growth rebounds among developed economies.
Revenues jumped 20% the finance department said Friday while program spending fell 4.8%. Spending on the "Canada Recovery Benefit" dropped CAD2.5 billion and employment insurance payouts fell 59% or by CAD2.2 billion as the job market rebounded. The government also has CAD107 billion of cash on the books, though some of that could be used for legal claims or increased military or health costs.
The fiscal improvement was moderated as new spending came online. Seniors' benefits climbed CAD700 million after recent expansion of coverage and because other payouts are linked to inflation. Public debt charges rose 57% or CAD1.1 billion.
For the fiscal year that began in April there was a CAD6.3 billion surplus versus a previous deficit of CAD47.3 billion. The budget presented in April forecast a CAD52.8 billion deficit this fiscal year. Finance Minister Chrystia Freeland spent more than half the economic windfall and former top federal cabinet adviser Kevin Lynch told MNI fiscal policy should be tightened fast.