MEXICO CITY (Reuters) - Canada will report within two weeks that it is “close” to meeting its target of eliminating the budget deficit in 2015-16, Finance Minister Jim Flaherty said on Sunday, suggesting Ottawa may still be a few billion dollars in the red at that time.
Canada ran a fiscal surplus for over a decade prior to the global financial crisis, but then fell into deficit as it injected cash into the economy to stimulate growth. In 2009, the Conservative government pledged to balance the books again in 2015-16 through government spending cuts and economic growth.
More recently, Flaherty has avoided a precise date for reaching that goal, referring only to reaching surplus in the “medium term.”
“If you look at what the numbers show us — and I’ll do the fall economic update within a couple of weeks — you’ll see the numbers and we’re pretty close to balancing,” Flaherty told reporters just before hearing into a meeting of G20 finance ministers and central bankers.
Flaherty said the assumptions in the fiscal outlook will be conservative to account for the high level of risk in the global economy. He said he wasn’t so worried about being a year or two behind schedule with the fiscal target.
“When you’re looking at a budget of C$275 billion dollars and you’re looking at a few billion dollars of deficit, you’re pretty close,” he said.
“I’m not obsessed with this year or that year. I am obsessed with balancing in the medium term.”
The G20 agreed in 2010 to halve deficits by 2013 but Flaherty conceded on Sunday that the goal was not feasible for the United States and that it could need more time.
He said if a fractious U.S. Congress did not act quickly after Tuesday’s elections to avert a rush of tax hikes and spending cuts known as the “fiscal cliff”, the U.S. would fall into recession and drag Canada along with it.
Canada has “tacitly gone along with” the U.S. Federal Reserve’s monetary easing policies, which is not sustainable because in the long term it will lead to inflation, Flaherty said.
Flaherty said last month that lower commodity prices were reducing the Canadian government’s revenues and that it would have an impact on the fiscal outlook.
Reporting by Louise Egan; Editing by Chizu Nomiyama