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The Canadian government's budget surplus narrowed in the first two months of the fiscal year as spending climbed faster than revenue, the finance department reported Friday.
The surplus was CAD1.5 billion in April and May compared with CAD5.3 billion in the prior fiscal year. Program spending climbed 6.6% or CAD3.9 billion, more than three times faster than the 1.8% rise in revenue. The surplus was also hit by a CAD1.3 billion rise in debt charges, or 23%, reflecting the Bank of Canada's 10 interest-rate hikes.
Spending gains are more notable in a period where the government is unwinding pandemic stimulus. Expenditures grew on higher benefits for seniors to cover inflation, transfers to provincial and municipal governments, and the plan to return money raised under the carbon tax to households.
Prime Minister Justin Trudeau shuffled a majority of his cabinet earlier this week as he sought to assure voters angry about high grocery bills and mortgage payments, while giving a show of support to Finance Minister Chrystia Freeland. Her March budget estimated a CAD43 billion deficit in 2022-23 and CAD40.1 billion in the fiscal year that began April 1. Investors criticized the failure to seek a balanced budget amid a strong rebound and a central bank struggling to cool inflation. (See: MNI INTERVIEW:Busted Canada Debt Goal Means Pain Later-Ex Aide)
Still, the government also has CAD60 billion of cash, stockpiled during the pandemic slump. That's down from CAD104 billion a year ago.
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.