Flaherty won't rule out budget deficit

Sun Oct 26, 2008 9:39pm EDT
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TORONTO (Reuters) - Finance Minister Jim Flaherty said on Sunday he could not rule out running a federal budget deficit in the current fiscal year, the first time the government has conceded such a possibility.

Flaherty, in an interview with the Canadian Broadcasting Corp, said he still expected a modest surplus for the fiscal year ending March 31. Even so, he told CBC News, he could longer say a surplus was certain, given the precarious state of the world economy. For details, see here

During the recent election campaign, Prime Minister Stephen Harper's Conservatives repeatedly asserted that they would keep the budget in surplus if reelected.

When asked CBC News if a deficit was possible, Flaherty on Sunday said: "We will see. I would not categorically rule out a deficit."

He said the government would run a deficit if a global recession was having a significant impact on the Canadian economy.

The government would run a deficit "if it were the responsible thing to do in a critical situation in Canada," Flaherty said in a story on the CBC's website.

To be sure, he said, the government still opposed running deficits year after year. Such "structural" deficits were eliminated by Liberal governments during the 1990s.

Flaherty told the CBC that the government would be adamant about keeping planned tax cuts in place, and he said Ottawa would not cut social and health transfers to the provinces and territories.

<p>Finance Minister Jim Flaherty speaks during a news conference at Parliament Hill in Ottawa October 23, 2008. REUTERS/Chris Wattie</p>