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The Confederation Building reflects off the windows of a building in downtown Ottawa. July's fiscal update says the federal government operated with a deficit of $12-billion for the month.Sean Kilpatrick/The Canadian Press

The federal government ran a $12-billion deficit in July, according to new Finance Department figures that provide a sense of the fiscal landscape as the re-elected minority Liberal government faces calls from premiers and opposition parties for billions in new spending.

The Finance Department’s monthly tracking of Ottawa’s bottom line shows that during the first four months of the fiscal year, from April 1 until the end of July, the government ran a total deficit of $48.5-billion.

Prime Minister Justin Trudeau’s Liberal government was re-elected Monday with a minority mandate on a platform that included $78-billion in new spending, in addition to what had been outlined just a few months earlier in the April budget.

Canada’s premiers issued a joint statement late Thursday in which they restated their “urgent” request for Ottawa to dramatically increase the size of the Canada Health Transfer, a recurring payment by the federal government to provinces and territories for use in funding health care.

“Premiers urge the Prime Minister to hold a First Ministers’ Meeting on long-term, unconditional health funding prior to the federal Speech From the Throne and certainly by the end of the calendar year to achieve resolution to the long-standing funding shortfall facing our health care systems due to the lack of a true federal funding partner,” the premiers said in their statement.

Finance Minister Chrystia Freeland’s April budget projected the federal deficit would be $154.7-billion for the current fiscal year, down from a projected $354.2-billion the previous year, during the first waves of the pandemic.

The Parliamentary Budget Officer issued a report in August ahead of the federal election campaign that said those projections had changed slightly, and that the deficit for the current fiscal year was on pace to come in at $138.2-billion.

Using the PBO’s projections as a base, the Liberal Party’s promised $78-billion in new spending over five years would bring this year’s projected deficit to $156.9-billion.

Ms. Freeland is expected to release a fiscal update later this year that will outline how those campaign promises will translate into official government policy.

The challenge for the Liberals is that the party will need the support of at least one of the three other main parties in the House of Commons – the Conservatives, the Bloc Québécois or the NDP – in order to obtain Parliamentary approval for confidence votes in areas like government spending plans.

The NDP was a frequent ally of the Liberals for such votes in the previous Parliament. NDP Leader Jagmeet Singh’s campaign platform called for $214-billion in new spending over five years, which is more than twice what the Liberals promised. Since the election, Mr. Singh has said he will be pushing the Liberals to adopt new taxes on corporations and the “ultra rich,” as a way of offsetting the cost of pandemic-related spending. The NDP Leader has also said that pharmacare and child care are among his party’s priorities.

Bloc Québécois Leader Yves-François Blanchet has said his priority will be to advocate on behalf of calls by Quebec and other provinces for an immediate annual increase of $28-billion to the Canada Health Transfer.

The Finance Department’s monthly report – which is called the Fiscal Monitor – notes that while the economic landscape has improved significantly since last year, challenges remain.

“As expected, the government’s 2021-22 financial results show a marked improvement compared to the peak of the COVID-19 crisis reached in early 2020-21, and the unprecedented level of temporary COVID-19 response measures at the time,” the report says. “That said, they continue to reflect challenging economic conditions, including the impact of continuing restrictions, and the remaining temporary COVID-19 Economic Response Plan supports in 2021-22.”

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