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.
The plan for tackling the deficit includes ending the extraordinary stimulus spending at the end of March 2011, which would automatically reduce the gap by C$19 billion, Day said.
He said additional savings would be achieved by a previously announced freeze on all operational spending and shaving costs on low-priority programs. Finally, Day said the recovering economy would generate increased revenues.
“That effectively retires the deficit to zero,” he said.
The Conservatives, who have made tax cuts the hallmark of their rule since 2004, have been adamant at following through with scheduled corporate tax cuts despite opposition demands to put them on hold to help balance Ottawa’s books.
Reporting by John McCrank and Claire Sibonney; editing by Rob Wilson