Finance Canada
Annual Financial Report of the Government of Canada
Fiscal Year 1998-99

For the fiscal year 1998-99, there was a budgetary surplus of $2.9 billion. Together with the $3.5-billion surplus recorded in 1997-98, this marks only the second surplus since 1969-70 and the first back-to-back surpluses since 1951-52. With these surpluses, the absolute stock of net public debt has declined by $6.4 billion in two years and net public debt as a percentage of the economy is on a permanent downward track. 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.

This turnaround in federal government finances is a historic milestone and represents an achievement that all Canadians can truly be proud of, for without their efforts, it would not have been possible. This turnaround also underlines the soundness of the government's fiscal strategy – basing budget plans on prudent planning assumptions backed by a Contingency Reserve and adopting policies which have engendered economic growth and job creation. With the era of deficit financing now over, Canada is entering the new millennium with renewed financial credibility.

Actions to address the fiscal problem facing Canada were both balanced and measured. Even as the deficit was being eliminated, targeted investments were undertaken to enhance job creation and growth and address priorities in health care, knowledge and innovation. In the 1997 budget, the government announced the establishment of the Canada Foundation for Innovation, with an initial endowment of $800 million. In the 1998 budget, the Canadian Opportunities Strategy was launched. Central to that strategy was the establishment of the Canada Millennium Scholarship Foundation, with an endowment of $2.5 billion. Effective 1997-98, the cash floor under the Canada Health and Social Transfer (CHST) was increased from $11 billion to $12.5 billion. In the 1999 budget, a one-time supplement of $3.5 billion to the CHST was made from funds available in 1998-99. In addition, the 1998 and 1999 budgets began the process of providing affordable broad-based tax cuts to all Canadians. In the 1998 budget, personal income tax measures amounting to $1.1 billion were announced for 1998-99. The 1998 and 1999 budget tax measures will mean further savings of $16.5 billion for Canadians over the next three years. In addition, employment insurance premium rates for both 1998 and 1999 were cut, delivering savings of some $800 million in both 1998-99 and 1999-2000. These initiatives were financed within the available resources and not with borrowed money.

This is the sixth edition of the Annual Financial Report. Publication of the report responds to recommendations by the Auditor General and the House of Commons Standing Committee on Public Accounts. The government shares their view that providing Canadians with accurate, relevant, understandable and timely information on its financial activity enhances government accountability and enables Canadians to play a more active and effective role in guiding government decision-making. To make the report more useful and easier to understand, a survey form is attached to solicit users' views for further improvements.

The financial data in this report are based on the audited results, which will appear in more detail in the 1999 Public Accounts of Canada, scheduled for tabling in the House of Commons this fall. They cover the federal government's spending and revenue performance for the past fiscal year (April 1, 1998-March 31, 1999), and detail the factors affecting these results. In addition, the Fiscal Reference Tables have been updated to incorporate the results for 1998-99 and historical revisions to the National Economic and Financial Accounts published by Statistics Canada. These tables are an integral part of this report.