December 22, 2023 – In a fiscal disclosure that demands attention, the federal government has reported a budgetary deficit of $15.1 billion for the period spanning April to October this year, with a significant portion, almost $7 billion, incurred in the month of October. Compare that to a $174 million surplus during the same period last year – the contrast is stark.
Revenue Boom, Spending Spree: What’s Happening?
Government revenues have seen a slight uptick of 1.2% ($3 billion), primarily propelled by higher interest revenues and other non-tax revenue streams. However, the buoyancy in revenue is overshadowed by a noteworthy surge in program expenses which escalated by $11.8 billion or 5.4% (excluding net actuarial losses) compared to the corresponding period last year – a spending spree across all major categories.
Public debt charges – caused by past deficits – are skyrocketing and are a major cause of this deficit. From April to October 2023, they are up $7.5 billion, marking a 38.1% surge, predominantly attributable to higher interest rates. Compared to October 2022, public debt charges were up $1.8 billion, or 73.6%.
October 2023: A Month to Forget
Canada’s financial rollercoaster hit a low in October, posting a deficit of $6.96 billion. Contrast this with a modest C$1.90 billion deficit in the same month of 2022. Public debt charges seem to be the main reason for this, showcasing the havoc wreaked by higher interest rates.
The Broader Financial Canvas
Zooming out reveals a comprehensive fiscal picture: a $15.1 billion deficit and a non-budgetary transaction requirement of $32.1 billion, resulting in a total financial requirement of $47.2 billion for the April to October 2023 period. This is a considerable escalation from the $31.2 billion required during the corresponding period the previous year.
In managing this financial challenge, the government financed the $47.2 billion requirement, augmenting cash balances by $11.6 billion through an increase in unmatured debt amounting to $58.8 billion. The issuance of treasury bills played a pivotal role in achieving this financial adjustment.
The federal government’s decision to persist in resorting to new debt financing and increased money printing is laying the groundwork for looming future deficits, exacerbating inflationary pressures, and perpetuating a concerning feedback loop of escalating spending. Significant reforms are imperative to bring government spending under control.
