Canada deficit shrinks at start of new fiscal year

Fri Jul 27, 2012 11:50am EDT
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OTTAWA (Reuters) - Canada's federal budget deficit shrank in the first two months of the 2012-13 fiscal year, with the government reporting a shortfall on Friday that was half the size of the one a year earlier.

Helped by higher revenues, continued economic growth and ultra-low borrowing costs, Ottawa posted a deficit for April and May of C$832 million ($824 million), compared with a C$2 billion deficit in the same period last year.

The monthly deficit in April was $19 million but it grew to C$813 million in May, the Department of Finance said in its monthly fiscal monitor report.

Canada slipped into deficit during the global financial crisis following more than a decade of surpluses, which had made it the fiscal darling of the Group of Seven industrialized nations.

Eager to retain that status, the Conservative government promises to balance its books by 2015-16 through a combination of economic growth and a 6.9 percent spending cut across the federal bureaucracy.

It has reported a preliminary deficit of C$23.5 billion, about 1.5 percent of gross domestic product, for 2011-12, below forecast, but the number could be revised after year-end adjustments.

Revenues in April-May climbed 5 percent from a year earlier on higher intake from all tax categories and growth in other revenue streams.

Program expenses rose by a more modest 3.4 percent as a decrease in employment insurance benefits partially offset higher payments for other social benefits and transfers to other levels of government.

Public debt charges fell 6.9 percent due in part to near record-low borrowing costs.   Continued...