Statement by the Minister of Finance about the Canadian Dollar

January 22, 2002

The following is a transcript of a statement made yesterday by the Minister of Finance about the value of the Canadian dollar compared to the U.S. currency:

"No one is happy with what has been happening with the Canadian dollar, certainly not the Government of Canada. The fact that other currencies are suffering as well does not make it any more palatable.

In Canada's case, I really wonder whether currency markets are fully taking into account today's reality. We have a very diversified economy. Commodities make up 30% of our exports today compared to 60% twenty years ago. We are the only G7 country with a balanced budget this year. That is our 5th in a row. Our debt to GDP ratio has fallen by 20 percentage points since 1995, the largest drop of any major industrialized nation and it's going to continue to drop next year. We have paid back over 35 billion dollars of debt, and over 17 billion as recently as last year. We now have a large current account surplus compared to the United States, which is in huge deficit. And furthermore, our foreign debt has dropped from 45% to 20% as a share of GDP, that is its lowest level in 50 years.

Our average corporate tax rate will soon be lower than the US and our average tax on capital gains is lower than in the US, as of today. [We have had] 10 years of very low inflation, one of the best inflation records in the world. That is a full percentage point below the US. With respect to the economy, in the midst of global uncertainty, we should not forget that in 2001 we had better performance than the United States and most forecasters are predicting Canada's economy will perform as well if not better than the US economy this year.

In summary, our commitment is to continue with our policy of fiscal discipline and improving competitiveness for Canada. Everybody knows that exchange rates can be volatile, however they do, over time, reflect economic conditions, and we believe that the factors that I have just set out will be reflected positively in the Canadian dollar."