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MNI: Canada Apr-Jun Budget Surplus Defies Deficit Projection

(MNI) OTTAWA
OTTAWA (MNI)

Canada posted a CAD4.9 billion budget surplus in June to bring the total in the first three months of the fiscal year to CAD10.2 billion, a show of strength as the government projects a big deficit with pandemic supports unwinding.

The June surplus compared with a CAD12.7 billion deficit a year earlier, the Finance Department's monthly Fiscal Monitor report showed Friday. Federal government revenue climbed 22% or CAD6.6 billion in June from a year earlier and program spending fell 28% or by CAD11.1 billion.

Finance Minister Chrystia Freeland presented a budget April 7, spending more than half the windfall from the economic rebound. Former top federal cabinet adviser Kevin Lynch told MNI fiscal policy should be tightened as fast as extra deficit spending was introduced when Covid hit to give the public a clear message inflation will remain under control. (See: MNI: Canada Should End Stimulus Symmetrically- Ex Cabinet Czar)

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%. Canada still benefits from a triple-A credit rating and relatively low market rates. Ten-year government bonds yielded 3.05% Friday morning in Toronto, up from 1.20% a year ago.

Source: Finance Department

MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com
MNI Ottawa Bureau | +1 613-314-9647 | greg.quinn@marketnews.com

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