Ottawa runs $1B deficit in first quarter, down from $5B surplus last year

OTTAWA — The federal government ran a deficit of $1.0 billion for the first quarter of its fiscal year, down from a surplus of $5.0 billion in the same period last year though “broadly consistent” with projections in the 2016-17 budget, the Finance Department said Friday.

“The financial results for the first three months of the fiscal year provide limited information with respect to the outlook for the year as a whole,” the department said in its fiscal monitor report.

“This is because the timing of revenues and expenses can vary from year to year and because the results do not yet reflect several significant government initiatives, such as the introduction of the Canada child benefit.”

In the spring budget, the Liberal government projected a $29.4-billion deficit for the 2016-17 fiscal year, which included billions in spending. Those expenditures included the Canada child benefit, which began going out to families in July.

The new child benefit replaced the universal child care benefit, the Canada child tax benefit and the national child benefit supplement.

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Government revenues fell $1.5 billion or 2.1 per cent to $71.8 billion in the first quarter of the fiscal year, while program spending increased $5.1 billion or 8.3 per cent to $66.4 billion. Public debt charges totalled nearly $6.4 billion, down from $7 billion, due largely to a lower average interest rate.

For June, the federal government ran a deficit of $1.1 billion as revenue fell and spending increased. The shortfall compared with a surplus of $1.1 billion in the same month last year.

Revenue fell $500 million or 2.2 per cent in June due to lower corporate income tax revenue, non-resident income tax and excise taxes and duties.

Program spending grew by $1.6 billion that month, an increase of 7.5 per cent, due to growth in major transfers to other levels of government and direct program expenses, though that was partially offset by a drop in transfers to people such as social benefit payments.

Public debt charges increased by $100 million or 3.1 per cent, mainly due to higher consumer price index adjustments on real return bonds.

Craig Wong, The Canadian Press