May 23, 2008 / 3:06 PM / in 10 years

Canada posts 11th budget surplus; outlook murky

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.

<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>

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.

The government said revenues and program expenses for the year were both slightly lower than had been projected, but did not reflect a series of adjustments that have yet to be made.

($1=$0.99 Canadian)

Reporting by Louise Egan; editing by Rob Wilson

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