Report Highlights
- Budgetary surplus of $2.9 billion in 1998-99, following a surplus of $3.5 billion in 1997-98: first back-to-back surpluses since 1951-52.
- Net public debt, at $576.8 billion, down $6.4 billion since 1996-97; net public debt-to-GDP
ratio down to 64.4 per cent from a peak of 71.2 per cent in 1995-96.
- Market debt – the debt issued on credit markets – fell even faster than net public debt. Over the last two fiscal years, $16.4 billion of market debt has been retired.
- By accounting practices used in most other countries, a financial surplus for the third consecutive year was reported – the only G-7 country to do so.
The budgetary balance
In 1993-94, the federal deficit stood at $42 billion. The actions taken in the 1994, 1995 and 1996 budgets, coupled with sustained economic growth, resulted in the elimination of that deficit in just four years. In 1997-98, a budgetary surplus of $3.5 billion was recorded, the first surplus in 28 years. This has now been followed by a surplus of $2.9 billion in 1998-99.
This turnaround in the budgetary balance reflected the combined effects of lower program spending, primarily reflecting the expenditure reduction measures introduced since 1993, and higher revenues, primarily reflecting the growth in the economy. The contributions are best viewed in terms of their relationship to gross domestic product (GDP). Over the period 1993-94 to 1998-99, there was an improvement of 6.1 percentage points of GDP in the budgetary balance – from a deficit of 5.8 per cent of GDP to a surplus of 0.3 per cent. Over two-thirds of this improvement was attributable to the decline in program spending – from 16.6 per cent of GDP in 1993-94 to 12.4 per cent in 1998-99. Budgetary revenues increased by 1.4 percentage points of GDP – representing about 23 per cent of the overall improvement in the budgetary balance. Public debt charges declined by 0.6 percentage points, accounting for about 10 per cent of the improvement in the budgetary balance.
Net public debt
The 1998-99 surplus brought the federal government's net public debt – the accumulation of annual deficits and surpluses – down to $576.8 billion. As a share of GDP, the net public debt dropped to 64.4 per cent, down 6.8 percentage points from the peak of 71.2 per cent in 1995-96. This ratio is generally recognized as the most appropriate measure of the debt burden as it measures debt relative to the ability of the government and the country's taxpayers to finance it. This is the third consecutive year in which the debt-to-GDP ratio has declined. The ratio is now back to where it was in the early 1990s, but still well above what it was in the 1970s. The net public debt at the end of 1998-99 was $18,923 for each Canadian, down from $19,184 a year earlier.
Table 1
Financial highlights
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
(billions of dollars)
Budgetary transactions Revenues 116.0
123.3
130.3
140.9
153.2
155.7
Program spending -120.0
-118.7
-112.0
-104.8
-108.8
-111.4
Operating balance -4.0
4.6
18.3
36.1
44.4
44.3
Public debt charges -38.0
-42.0
-46.9
-45.0
-40.9
-41.4
Budgetary balance -42.0
-37.5
-28.6
-8.9
3.5
2.9
Non-budgetary transactions 12.2
11.6
11.4
10.2
9.3
8.6
Financial requirements/surplus (excludes foreign exchange transactions) -29.9
-25.8
-17.2
1.3
12.7
11.5
Foreign exchange transactions -2.1
-1.4
-4.7
-7.8
-2.2
-5.7
Net financial balance -32.0
-27.3
-21.9
-6.5
10.6
5.8
Net change in borrowings 31.2
27.0
28.5
7.3
-9.6
-6.9
Net change in cash balances -0.7
-0.2
6.7
0.8
1.0
-1.1
Financial position Total liabilities -546.4
-584.8
-624.7
-640.7
-638.5
-640.3
Total assets 38.2
39.1
50.4
57.5
58.8
63.5
Accumulated deficit (net public debt) -508.2
-545.7
-574.3
-583.2
-579.7
-576.8
Financial results (% of GDP) Budgetary revenues 16.0
16.1
16.1
16.9
17.5
17.4
Program spending 16.6
15.5
13.9
12.6
12.4
12.4
Public debt charges 5.2
5.5
5.8
5.4
4.7
4.6
Budgetary balance -5.8
-4.9
-3.5
-1.1
0.4
0.3
Net public debt 70.1
71.1
71.2
69.9
66.3
64.4
Net public debt consists of interest-bearing debt and other liabilities, net of financial assets. Interest-bearing debt, in turn, consists of unmatured, or market, debt and the government's obligations to internally held accounts – primarily the liabilities for the federal government employees' pension plans.
In 1998-99, interest-bearing debt was $595.0 billion, up $0.2 billion from 1997-98.
- However, of this, market debt declined by $6.9 billion to $460.5 billion. This reflected a lower stock of Treasury bills (down $15.4 billion) and Canada Savings Bonds (down $2.1 billion), offset in part by higher marketable bonds (up $10.0 billion) and bonds for the Canada Pension Plan (up $0.6 billion).
- This decline in market debt was offset by an increase of $7.1 billion in liabilities to public sector pensions and other accounts.
The financial balance
Financial requirements/surplus measures the difference between cash coming into the government and cash going out. Most industrialized countries currently use a measure comparable to the financial requirements/surplus as their main budget measure.
- There was a financial surplus (excluding foreign exchange transactions) of $11.5 billion in 1998-99. This is the third consecutive year in which a financial surplus has been recorded – the only G-7 country to do so.
During the course of the fiscal year, there was a net requirement of $5.7 billion relating to foreign exchange transactions, up from a net requirement of $2.2 billion in 1997-98. Including these amounts, the financial surplus in total was $5.8 billion. This compares to a financial surplus of $10.6 billion in 1997-98.
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