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(Adds details from report, background, minister statement)
OTTAWA, June 17 (Reuters) - The Canadian government should wind down or pare back its retail debt program, a commissioned report advised on Wednesday, a recommendation that the country's finance minister did not accept.
The program, created in 1946 as a way to provide Canadians with a secure savings instrument, runs the Canada Savings bonds and Canada Premium bonds.
The report done by auditing, tax and advisory firm KPMG found that there is "currently no valid economic rationale" for the program. The firm noted that the program is no longer a net source of funds for the government, since overall sales do not exceed redemptions. A spokesman for Finance Minister Joe Oliver said the minister did not accept the recommendations of the government-commissioned report.
The evaluation was undertaken to assess the effectiveness of the Finance Department and Bank of Canada in enabling the program to give Canadians access to government retail savings instruments in a cost-effective manner.
Despite a number of initiatives over the years to improve the program and better align it with investors' needs, the stock of retail debt was less than C$7.7 billion ($6.26 billion) as of March 2013, according to the report. The program held 0.7 percent of the market share of insured retail savings instruments in Canada in 2013.
The report said the program is not a cost-effective way for the government to raise funds and, given the low interest rate environment and increasing administration costs, it is doubtful the program could return to being cost effective.
"The primary recommendation of the evaluation study team is that the Retail Debt Program be wound down in an orderly fashion," the report said.
It also noted that there is currently only a very limited need for the program from Canadians as other retail debt instruments insured by the Canadian Deposit Insurance Corporation "leave virtually no market void unaddressed."
If the government did not wind the program down, the report's fall-back recommendation is a no-frills version which would eliminate the costly payroll sales channel and would maintain a cash sales channel. ($1 = 1.2307 Canadian dollars) (Reporting by Randall Palmer and Leah Schnurr; Editing by David Gregorio)