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Finance Minister Chrystia Freeland rises during Question Period in the House of Commons on May 17, 2023.Spencer Colby/The Canadian Press

After cruising through most of the fiscal year in a surplus position, federal finances plunged into the red in March, the final month, with a $44.4-billion deficit.

While March tends to be a month of higher-than-average spending, as various expenses are recorded, the figure marked an unusual contrast with earlier months. Federal finances had been in a surplus position of $3.1-billion after the first 11 months of the fiscal year.

The Finance Department’s monthly fiscal monitor report, released Friday, shows a cumulative budget deficit of $41.3-billion over the 12-month period from April, 2022 to March, 2023. The official deficit for the previous fiscal year was $90.2-billion.

The report says public debt charges for the year as a whole were up 42 per cent – or $10.4-billion – from the previous fiscal year, “reflecting higher interest rates, as well as higher interest on the government’s pension and benefit obligations.”

The $41.3-billion deficit for the fiscal year is not the official figure and is subject to adjustments before it is finalized in the fall with the release of the public accounts.

It is slightly lower than the $43-billion deficit projected in Finance Minister Chrystia Freeland’s March 28 budget. It is also within the range of two scenarios Ms. Freeland presented in her Nov. 3, 2022, fall economic statement, which showed a “baseline scenario” deficit forecast of $36.4-billion, while also illustrating a “downside scenario” deficit of $49.1-billion if the economy underperformed projections.

But the $44.4-billion deficit for March is up sharply over the $25.7-billion deficit in March, 2022.

Friday’s report says the main reason is that program expenses were up 25.3 per cent year-over-year – or $15.7-billion – “largely reflecting higher provisions for contingent liabilities and loans, and increased transfers to other levels of government.” Public debt charges were also up 53.3 per cent – or $1.3-billion – owing to higher interest rates. Another factor was a 4.5-per-cent – or $1.8-billion – drop in revenues, the result of a one-time increase in the GST credit, which the government calls the Grocery Rebate.

When comparing the fiscal year as a whole to the 2021-22 fiscal year, the report says federal government revenues were up 8.6 per cent – or $34.2-billion – “due to economic growth and the waning fiscal and economic impact of COVID-19.”

Program expenses were down 6.5 per cent – or $29.9-billion – largely owing to the expiration of temporary pandemic measures.

Bank of Montreal chief economist Doug Porter said “the path toward balance appears to have stalled.” In a research note Friday, Mr. Porter said the government’s latest deficit figure is in line with what had been forecasted in the budget.

“While that’s a moderate 1.5 per cent of GDP, Ottawa continues to spend with some force,” he said.