Canada posts 11th budget surplus; outlook murky

Fri May 23, 2008 11:21am EDT
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OTTAWA (Reuters) - Canada posted its 11th consecutive balanced budget in 2007-08, reporting on Friday a surplus of C$11.7 billion ($11.9 billion) for the fiscal year, or C$10.2 billion after deducting the cost of new measures announced earlier this year.

The after-cost estimate matches that given by Finance Minister Jim Flaherty in February, when he pledged to pay down C$10.2 billion in debt in 2007-08.

The numbers are still subject to end-of-year adjustments, which may not be known for months.

In March, the last month of the fiscal year, Ottawa posted a deficit of C$1.2 billion, compared with a deficit of C$2.43 billion a year earlier.

Flaherty aims for a much smaller surplus of C$2.3 billion in 2008-09, but as the economy slows the prospect of a small deficit looks increasingly likely.

The finance minister has vowed to balance the books no matter what. Canada's long-standing surplus, unmatched by other industrialized economies, is a source of pride in Ottawa and to jeopardize it is a political taboo.

In the year through March, government spending grew faster than revenue. Expenses were up 6.8 percent thanks to a 13.2 percent jump in transfers to provincial governments for health and social programs, and as well as special aid to one-industry towns hit hard by the economic downturn.

Revenues climbed 4.6 percent, boosted primarily by corporate income taxes.

In March, a big jump in personal income tax collection helped lift revenues by 5.2 percent. Expenditures in the month were unchanged.   Continued...

<p>Canada's Finance Minister Jim Flaherty waits to testify before the Commons public accounts committee on Parliament Hill in Ottawa in this May 13, 2008 file photo. REUTERS/Chris Wattie</p>