Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Canada's budget deficit widened to CAD26 billion from the start of the fiscal year in April through January on higher program spending and a surge in borrowing costs, with the last monthly update before a full budget due next month underlining the pressure fiscal policy is putting on the Bank of Canada's inflation fight.
Program spending rose CAD21 billion or 6.7% while revenue climbed CAD11 billion or 3%, the finance department reported Friday from Ottawa. Public debt charges rose 36% or CAD10 billion, reflecting the central bank's campaign of 10 interest-rate hikes and higher global bond yields.
For the month of January the deficit of CAD2.1 billion was wider than the prior year's CAD0.9 billion. Deficits over each of the last seven months have been bigger than the previous year, at a time of weak economic growth and higher unemployment. Finance Minister Chrystia Freeland has said the next budget on April 16 will again focus on the country's housing squeeze and she wants to help create conditions where Governor Tiff Macklem can lower the highest borrowing costs in decades.
Freeland's fall update projected a CAD40 billion deficit for the fiscal year that began last April 1 equal to 1.4% of GDP. The shortfall for the fiscal year starting next month was estimated at CAD38 billion or 1.3% of GDP. While deficits are much smaller than the U.S. some experts question why Canada's fiscal policy isn't tighter following a strong Covid economic rebound. (See: MNI INTERVIEW:Spending Remains Too Hot For BOC-Ex Govt Adviser)
The Liberal government continues to miss its own fiscal "anchors" and remains under pressure from the NDP for new spending under a deal where the NDP helps keep Justin Trudeau in power until 2025 when his regular four-year mandate ends. The government also has an elevated cash stockpile of CAD85 billion, versus CAD46 billion before the pandemic.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.