Canada deficit shrinks, says fiscal plan on track

Fri Sep 24, 2010 3:10pm EDT
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OTTAWA (Reuters) - Canada's monthly budget deficit fell in July from a year earlier when the government spent billions to support the struggling auto industry during the recession.

The deficit totaled C$473 million ($459 million) in July, down from C$5.8 billion in July 2009 as expenses declined and revenues increased, the Department of Finance said on Friday in its monthly fiscal monitor report.

In the first four months of the fiscal year, April-July, the budget shortfall shrank to C$7.70 billion from C$18.33 billion a year earlier.

The Conservative government slid into deficit after a decade of surpluses partly because of stimulus spending aimed at softening the impact of the global recession.

Preliminary estimates for the 2009-10 fiscal year showed a deficit of C$47 billion, but final numbers could be higher and the finance minister recently said the annual deficit would top C$50 billion.

Treasury Board President Stockwell Day, who is tasked with figuring out where to pinch spending in order to bring down the deficit and meet fiscal targets, said Ottawa's forecasts for the 2009-10 shortfall are turning out to be fairly accurate.

"We're staying on track. The numbers indicate to us that we are on track and there's some suggestion ... from other sources that we may be slightly ahead, but I'm saying we're on track ... we have not seen any significant move off that," he told reporters in Toronto.

In March, the government predicted a 2010-11 deficit of C$49.2 billion, narrowing to C$1.8 billion by 2014-15.

Finance Minister Jim Flaherty said the budget would be back in surplus the following year.   Continued...