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The final deficit figure is smaller than the projected deficit of $113.8-billion listed in Finance Minister Chrystia Freeland’s April budget.Sean Kilpatrick/The Canadian Press

The federal deficit for the previous fiscal year was $90.2-billion, significantly smaller than the government’s April projection as revenues were buoyed by higher inflation and an economy that outperformed earlier expectations.

The figure marks a sharp decline from the $327.7-billion deficit recorded in the prior fiscal year of 2020-21, which covered the height of the pandemic.

The new figures were released Thursday through the Public Accounts of Canada, which reports the government of Canada’s final financial numbers for the 2021-22 fiscal year that ended March 31.

The final deficit number is smaller than the projected deficit of $113.8-billion listed in Finance Minister Chrystia Freeland’s April budget. It is also slightly smaller than what Parliamentary Budget Officer Yves Giroux had projected in a recent report.

The public accounts figures support the view of Mr. Giroux and other economists who say Ottawa’s bottom line has improved considerably since the April budget. The PBO’s recent report said higher inflation and stronger personal and corporate tax revenue are the major drivers of the change.

The PBO and other economists project that the deficit for this fiscal year, which began April 1, is on track to be significantly smaller than the April budget’s forecast of $52.8-billion. The public accounts do not include forecasts for the current fiscal year. An updated projection will be included in Ms. Freeland’s fall fiscal update, which is expected to be released soon.

Bank of Nova Scotia economist Rebekah Young said the public accounts reflect the state of the Canadian economy several months ago and, since then, much has changed. She said Ms. Freeland’s fall fiscal update will need to account for the widespread view that higher interest rates to cool inflation will slow the economy and potentially generate a recession.

“It’s not surprising that we had big windfalls last year. We shouldn’t be surprised to see big windfalls this year,” she said. “But clearly inflation is what’s driving interest rates up and that’s what’s basically causing forecasters to write down their growth outlook.”

An increase in unemployment would mean less tax revenue and higher government expenses through automatic support programs such as employment insurance.

“I wouldn’t be surprised if it’s a fairly slim fiscal update,” Ms. Young said in an interview Thursday. “The government will certainly want to be pretty cautious.”

She noted that the public accounts illustrate a recent pattern in which the Liberal government, when faced with higher than expected tax revenue, will announce some new spending while also posting final deficit figures that are smaller than earlier forecasts.

Thursday’s public accounts report shows federal revenues were $413.3-billion, an increase of 30.6 per cent – or $96.8-billion – over the previous fiscal year, which the government attributes in part to the fact that “the general economic situation improved.”

Program expenses, net of actuarial losses, came in lower than projected. The final number in the public accounts is $468.8-billion, down slightly from the $473-billion projected in the April budget and down dramatically from the $608.5-billion spent in the previous fiscal year. Public debt charges were $24.5-billion, in line with the budget projection of $24.9-billion, but up from $20.4-billion the previous year.

The federal debt is $1.13-trillion, slightly under the budget estimate of $1.16-trillion. The debt as a percentage of GDP is 45.5 per cent, according to Thursday’s Public Accounts. The budget had projected it would be 46.5 per cent.

Prior to the pandemic for the 2018-19 fiscal year, the federal debt was $685.4-billion, the deficit was $14-billion and the debt as a percentage of GDP was 30.7 per cent.

Conservative MP and finance critic Jasraj Singh Hallan said in a statement that his party’s concern is the national debt and the cost of living.

“The continued out-of-control spending by this Liberal government is only piling on to the record level of federal debt. Higher revenues because of inflation are cancelled out by continued deficits,” he said, calling for the fall update to “provide relief” for Canadians.

NDP Leader Jagmeet Singh said in a statement that “Canada is heading towards a self-inflicted recession” in which many workers may lose their jobs, while also facing higher borrowing costs.

“While it is important for the deficit to go down, it should by no means be done on the backs of working families who are struggling to get by,” he said.

Adrienne Vaupshas, a spokesperson for Ms. Freeland, said the public accounts show an improving trend compared to the peak of the pandemic and said Canada has the lowest debt-to-GDP in the G7.

“That is the result of conscious and intentional decisions, particularly bringing the deficit down this year,” she said.