The federal government started the fiscal year on stronger fiscal footing, with a $3.2-billion surplus over April and May.
New figures released Friday by the Finance Department show the two-month surplus marks an improvement over the $68-million surplus that was reported during the same two months a year earlier.
Finance Minister Bill Morneau’s February budget estimated that the deficit for the fiscal year that began April 1 would come in at $18.1-billion. That figure included a $3-billion adjustment for forecasting risks and unforeseen events.
The final deficit figure for the previous fiscal year of 2017-18 has not yet been released. The February budget had estimated the figure would be $19.4-billion. A Finance Department report in May said that the government expected the final figure would be “broadly in line” with that estimate.
The minister’s next opportunity to revise his forecasts will come in the fall when he releases the government’s fiscal update.
The Finance Department’s monthly reporting on federal revenues provides a general sense of how federal finances are performing in comparison to the previous year. However, the figures can fluctuate significantly from month to month, and the government tends to record large amounts of spending in March, the last month of the fiscal year.
The Finance Department does not release a report for the first month of the fiscal year, meaning Friday’s report is the first indication of how the 2018-19 fiscal year is shaping up.
The Liberal Party campaigned on a pledge to run short-term deficits of no more than $10-billion a year and to erase the deficit before the 2019 federal election. Mr. Morneau has since abandoned that promise and has not announced a new target date for balancing the books. Instead, the Finance Minister said his government’s goal is to keep the federal debt-to-GDP ratio on a declining trend.
The federal debt-to-GDP ratio was 30.4 per cent in 2017-18, and the budget projected that the ratio would decline to 28.4 per cent by 2022-23.
A recent report on Canada by the International Monetary Fund said its directors “welcomed” Ottawa’s debt-to-GDP reduction targets, but noted that the government’s plan could be more credible if more explicit fiscal targets were announced.
“With output above potential, directors agreed that the focus now should be on rebuilding fiscal buffers,” the IMF said in a report released earlier this month.