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MNI (Ottawa)

Canada's November budget deficit was the smallest since the pandemic took hold as the economic rebound boosted tax revenue and emergency spending was scaled back, the finance department reported Friday.

The deficit was CAD1.4 billion versus CAD15.4 billion a year earlier and CAD3.7 billion in October according to the monthly Fiscal Monitor. Revenue climbed 26% from a year earlier, and program spending declined 19% as Covid wage subsidies and recovery benefits waned.

The deficit from April when the current fiscal year began shrank to CAD73.7 billion from the prior CAD232 billion, with similar trends in revenue and spending as the monthly results. The government is also carrying an outsized CAD57.9 billion of cash on its books, built up as a precaution in the early Covid lockdowns.

Finance Minister Chrystia Freeland last month shaved deficit forecasts and said the economy may regain pre-pandemic GDP in the next few months. The estimated deficit for this fiscal year was reduced to CAD145 billion from CAD155 billion, or 5.8% of GDP, and it's expected to fade to CAD58 billion the next fiscal year.

Canada runs the risk of a “permanent” budget deficit, potentially fueling inflation, as lawmakers from across the political spectrum move away from previous commitments to fiscal balance, the Parliamentary Budget Officer recently told MNI. The BOC may be pulling back on stimulus to curb inflation this spring just as the government introduces a budget aimed at cashing in CAD78 billion of election campaign promises, former finance department official Rebekah Young told MNI.

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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