Canada says on track for budget surplus this year

Wed Jul 30, 2008 10:17am EDT
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OTTAWA (Reuters) - Although Canada is still on track to record a budget surplus this year, the government has no plans for big spending projects or major tax cuts in the near future, Finance Minister Jim Flaherty said on Wednesday.

Canada posted a budget deficit of C$517 million ($502 million) for April and May as corporate and sales tax collection fell sharply. Ottawa has estimated a surplus in 2008-09 of C$2.3 billion, down from the expected surplus of C$10.2 billion for 2007-08.

"This is a time of economic slowdown. We're on track in our budgeting but as you know, we did not budget for a large surplus in this fiscal year, 2008/09," Flaherty told reporters in televised remarks from Levis, Quebec.

"I'm satisfied and I'm confident that we're on track in terms of our revenues and expenses over the year but this is not a year for big new spending projects or big new tax reductions," he said.

The government cut the national sales tax to 5 percent from 6 percent, effective January 1, as part of a tax-cutting package it says will help the economy cope with the U.S. housing crisis.

Canada has recorded 11 budget surpluses in a row and the idea of a deficit would be very damaging politically.

($1=$1.03 Canadian)

(Reporting by David Ljunggren; Editing by Frank McGurty)

<p>Canada's Finance Minister Jim Flaherty gestures during a speech at the International Economic Forum of the Americas in Montreal, June 9, 2008. REUTERS/Christinne Muschi</p>