Financial Statements Discussion and Analysis

Public Accounts of Canada 2015 Volume I - Top of the page Navigation

Introduction


The Public Accounts of Canada is a major accountability report of the Government of Canada. This section, together with the other sections in this volume and in Volumes II and III of the Public Accounts of Canada, provides detailed supplementary information in respect of matters reported in the audited consolidated financial statements in Section 2 of this volume. Further discussion and analysis of the Government's financial results can be found in the Annual Financial Report of the Government of Canada - Fiscal Year 2014–2015, available on the Department of Finance's website.

The consolidated financial statements have been prepared under the joint direction of the Minister of Finance, the President of the Treasury Board and the Receiver General for Canada. Responsibility for the integrity and objectivity of the consolidated financial statements rests with the Government. A glossary of terms used in this financial statement discussion and analysis is provided at the end of this section.

2014–2015 Financial Highlights

  • The Government posted a budgetary surplus of $1.9 billion for the fiscal year ended March 31, 2015, compared to a budgetary deficit of $5.2 billion in 2013–2014.
  • Revenues increased by $10.7 billion, or 3.9 percent, from 2013–2014, reflecting growth in all major revenue streams. Program expenses increased by $5.2 billion, or 2.1 percent, reflecting increases in major transfers to persons and other levels of government. Public debt charges were down $1.6 billion, or 5.8 percent, due to a lower average effective interest rate on the stock of interest-bearing debt.
  • The accumulated deficit (the difference between total liabilities and total assets) stood at $612.3 billion at March 31, 2015. The accumulated deficit‑to‑GDP (gross domestic product) ratio was 31.0 percent, down from 32.3 percent a year earlier.
  • As reported by the Organisation for Economic Co‑operation and Development (OECD), Canada's total government net debt‑to‑GDP ratio, which includes the net debt of the federal, provincial/territorial and local governments, as well as the net assets held in the Canada Pension Plan and Quebec Pension Plan, stood at 40.4 percent in 2014. This is the lowest level among Group of Seven (G‑7) countries, which the OECD expects will record an average net debt of 86.8 percent of GDP for the same year.

Discussion and Analysis

Economic HighlightsLink to footnote 1

In 2014 and early 2015 there were two main factors which affected the performance of Canada's economy: persistent weakness in the global economy and the decline in global commodity prices, with the fall in crude oil prices having a significant impact.

Global growth remained subdued in 2014, reflecting relatively weak growth in the euro area and Japan and moderating growth in China. This weak external demand weighed on Canadian exports. Without solid growth in global demand, Canadian businesses were cautious about expanding capacity. As a result, real business investment growth slowed, between mid-2012 and the end of 2014, to an annual rate of about 1 percent.

The sharp decline in crude oil prices since mid‑2014 has further weighed on the Canadian economy, particularly in early 2015. For Canada, as a producer and net exporter of crude oil, lower oil prices have had a net negative impact on Canada's nominal GDP growth — the broadest measure of the tax base. In particular, the value of Canada's crude oil exports in the second quarter of 2014 (before the decline in oil prices) was $100 billion, or 5.1 percent of nominal GDP. The decline in crude oil export prices reduced the value of exports, and hence nominal GDP, by over $45 billion (2.3 percent of GDP) by the first quarter of 2015 (export volumes remained broadly unchanged). In addition, lower oil prices led to a significant retrenchment in real business investment in the oil and gas sector in the first quarter of 2015.

Nominal GDP growth in 2014 was higher than anticipated in Budget 2014. However, due to the fall in oil prices, growth fell from an average of 4.9 percent in the first three quarters of 2014 to 0.4 percent in the fourth quarter. In the first quarter of 2015, nominal GDP declined by 2.9 percent.

In response to economic conditions, short- and long-term interest rates have remained at historically low levels over the last two years and in 2014 were below Budget 2014 projections. Interest rates fell in early 2015, and in the first quarter of 2015 were lower than anticipated at the time of Budget 2015.

The unemployment rate declined from 7.1 percent in 2013 to 6.9 percent in 2014. Consumer Price Index (CPI) inflation remained below the mid-point of the Bank of Canada's target band in 2013 and 2014. Reflecting excess slack in the economy and lower commodity prices, CPI inflation in 2014 was lower than projected in Budget 2014.

Table Summary

The table presents a three‑year comparative of the expected private sector indicators rate. It consists of four columns: the listing of private sector indicators; 2013; 2014 and 2015.

Average Private Sector Forecasts
(Percent)

  2013 2014 2015
Real GDP Growth (%)      
December 2013 Survey / Economic Action Plan 2014 1.7 2.3 2.5
March 2015 Survey / Economic Action Plan 2015 2.0 2.5 2.0
Actual 2.0 2.4  
Nominal GDP Growth (%)      
December 2013 Survey / Economic Action Plan 2014 3.2 3.9 4.5
March 2015 Survey / Economic Action Plan 2015 3.4 4.4 1.6
Actual 3.4 4.3  
3‑Month Treasury Bill Rate (%)      
December 2013 Survey / Economic Action Plan 2014 1.0 1.0 1.5
March 2015 Survey / Economic Action Plan 2015 1.0 0.9 0.6
Actual 1.0 0.9  
10‑Year Government Bond Rate (%)      
December 2013 Survey / Economic Action Plan 2014 2.3 3.0 3.5
March 2015 Survey / Economic Action Plan 2015 2.3 2.2 1.7
Actual 2.3 2.2  
Unemployment Rate (%)      
December 2013 Survey / Economic Action Plan 2014 7.1 6.8 6.6
March 2015 Survey / Economic Action Plan 2015 7.1 6.9 6.7
Actual 7.1 6.9  
Consumer Price Index Inflation (%)      
December 2013 Survey / Economic Action Plan 2014 1.0 1.5 1.9
March 2015 Survey / Economic Action Plan 2015 1.0 1.9 0.9
Actual 1.0 1.9  

The Budgetary Balance

The Government posted a budgetary surplus of $1.9 billion in 2014–2015. The following graph shows the Government's budgetary balance since 1990–1991. To enhance the comparability of results over time and across jurisdictions, the budgetary balance and its components are presented as a percentage of GDP. In 2014–2015, the budgetary surplus was 0.1 percent of GDP, compared to a deficit of 0.3 percent of GDP a year earlier.

Annual Surplus/Deficit

Annual Surplus/Deficit. Refer to the text description following the image.

Image Description The graph "Annual Surplus/Deficit" illustrates the Government's budgetary balance since 1990–1991. To enhance the comparability of results over time and across jurisdictions, the budgetary balance and its components are presented as a percentage of GDP. The GDP percentage for 1990–1991 is −4.91; 1991–1992 is −4.64; 1992–1993 is −5.47; 1993–1994 is −5.20; 1994–1995 is −4.66; 1995–1996 is −3.63; 1996–1997 is −1.02; 1997–1998 is 0.33; 1998–1999 is 0.62; 1999–2000 is 1.42; 2000–2001 is 1.81; 2001–2002 is 0.71; 2002–2003 is 0.56; 2003–2004 is 0.74; 2004–2005 is 0.11; 2005–2006 is 0.94; 2006–2007 is 0.92; 2007–2008 is 0.61; 2008–2009 is −0.35; 2009–2010 is −3.55; 2010–2011 is −2.01; 2011–2012 is −1.48; 2012–2013 is −1.01; 2013–2014 is −0.27; and 2014–2015 is 0.10.

The 2014–2015 budgetary surplus of $1.9 billion compares to a deficit of $5.2 billion in 2013–2014.

Revenues were up $10.7 billion, or 3.9 percent, from the prior year, reflecting increases across all major revenue streams.

Expenses were up $3.6 billion, or 1.3 percent, from the prior year. Program expenses increased by $5.2 billion, reflecting increases in major transfers to persons and other levels of government, offset in part by decreases in other transfer payments and other program expenses. Public debt charges decreased by $1.6 billion, or 5.8 percent, from the prior year, reflecting a lower average effective interest rate on the stock of interest‑bearing debt.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the financial highlights. It consists of three columns: the list of financial reporting accounts; current year; previous year. The first series of rows presents the Consolidated Statement of Operations. The second series of rows presents the Consolidated Statement of Financial Position.

(in millions of dollars)

2014–2015 Financial Highlights

  2014–2015 2013–2014Link to footnote 2
Consolidated Statement of Operations    
Revenues 282,346 271,677
Expenses —    
Program expenses 253,841 248,607
Public debt charges 26,594 28,220
Total expenses 280,435 276,827
Annual (surplus) or deficit (negative 1,911) 5,150
Percentage of GDP (0.1%) 0.3%
Consolidated Statement of Financial Position    
Liabilities —    
Interest‑bearing debt 899,986 889,993
Other 123,631 111,730
Total liabilities 1,023,617 1,001,723
Financial assets 336,658 319,409
Net debt 686,959 682,314
Non‑financial assets 74,629 70,433
Accumulated deficit 612,330 611,881
Percentage of GDP 31.0% 32.3%

Revenues

Federal revenues can be broken down into four main categories: income taxes, other taxes and duties, Employment Insurance (EI) premiums and other revenues. Within the income tax category, personal income tax revenues are the largest source of federal revenues, and accounted for 48.1 percent of total revenues in 2014–2015 (the same percentage as in 2013–2014). Corporate income tax revenues are the second largest source of revenues, and accounted for 14.0 percent of total revenues in 2014–2015 (up from 13.5 percent in 2013–2014). Non-resident income taxes are a comparatively smaller source of revenues, accounting for only 2.2 percent of total revenues in 2014–2015, down from 2.4 percent in 2013–2014.

Other taxes and duties consist of revenues from the Goods and Services Tax (GST), energy taxes, customs import duties and other excise taxes and duties. The largest component of this category-GST revenues-accounted for 11.1 percent of all federal revenues in 2014–2015, down from 11.4 percent in 2013–2014. The share of the remaining components was unchanged at 5.6 percent of total federal revenues.

The last two categories of federal revenues, EI premium revenues and other revenues, which include such items as profits of enterprise Crown corporations, net foreign exchange and interest and penalties revenues, accounted for 8.0 and 11.0 percent of total federal revenues respectively in 2014–2015, unchanged from the previous year.

Composition of Revenues for 2014–2015

Composition of Revenues for 2014–2015. Refer to the text description following the image.

Image Description The graph "Composition of Revenues" illustrates the sources of revenues for the current year and their percentage related to the total revenues. The components are: Personal income tax 48.1%; Corporate income tax 14.0%; Non-resident income tax 2.2%; GST 11.1%; Other taxes and duties (excluding GST) 5.6%; Employment insurance premiums 8.0%; and Other revenues 11.0%.

The revenue ratio — revenues as a percentage of GDP — compares the total of all federal revenues to the size of the economy. This ratio is influenced by changes in statutory tax rates and by economic developments. The ratio stood at 14.3 percent in 2014–2015, which was slightly lower than in 2013–2014. This relative decrease reflects the fiscal cost of tax relief measures for families announced in the fall of 2014 (notably the Family Tax Cut) as well as the fact that a number of one–time factors temporarily increased revenues and the revenue ratio in 2013–2014. Overall, the revenue ratio has declined since 2001–2002, due primarily to tax reduction measures.

Revenue Ratio

Revenue Ratio. Refer to the text description following the image.

Image Description The Graph "Revenue Ratio" illustrates the revenues as a percentage of GDP since 1990–1991. The ratio for 1990–1991 is 17.3; 1991–1992 is 18.1; 1992–1993 is 17.5; 1993–1994 is 16.7; 1994–1995 is 16.6; 1995–1996 is 17.0; 1996–1997 is 17.5; 1997–1998 is 17.8; 1998–1999 is 17.7; 1999–2000 is 17.6; 2000–2001 is 17.7; 2001–2002 is 16.2; 2002–2003 is 16.1; 2003–2004 is 16.0; 2004–2005 is 16.0; 2005–2006 is 15.8; 2006–2007 is 15.9; 2007–2008 is 15.5; 2008–2009 is 14.2; 2009–2010 is 14.0; 2010–2011 is 14.3; 2011–2012 is 14.1; 2012–2013 is 14.0; 2013–2014 is 14.3; and 2014–2015 is 14.3.

Revenues Compared to 2013–2014

The following table compares revenues for 2014–2015 to 2013–2014.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of revenues. It consists of four columns: the listing of the category of revenues; current year; previous year; Change divided into two columns — Absolute and %. The first series of rows presents the Income tax revenues. The second series of rows presents Other taxes and duties. The third series of rows contains three rows: Employment Insurance premiums; Other revenues; and Total revenues.

(in millions of dollars)

Revenues

  2014–2015 2013–2014 Change
Absolute Percent
%
Income tax revenues —        
Personal 135,743 130,811 4,932 3.8
Corporate 39,447 36,587 2,860 7.8
Non‑resident 6,216 6,404 (negative 188) (negative 2.9)
Total 181,406 173,802 7,604 4.4
Other taxes and duties —        
Goods and services tax 31,349 30,998 351 1.1
Energy taxes 5,528 5,486 42 0.8
Customs import duties 4,581 4,239 342 8.1
Other excise taxes and duties 5,724 5,413 311 5.7
Total 47,182 46,136 1,046 2.3
Employment insurance premiums 22,564 21,766 798 3.7
Other revenues 31,194 29,973 1,221 4.1
Total revenues 282,346 271,677 10,669 3.9

Total revenues increased by $10.7 billion in 2014–2015, reflecting growth in all major revenue streams.

Personal income tax revenues increased by $4.9 billion, or 3.8 percent, reflecting gains in personal income.

Corporate income tax revenues increased by $2.9 billion, or 7.8 percent, reflecting growth in corporate taxable income which was broadly distributed across industry sectors.

Non‑resident income tax revenues decreased by $0.2 billion, or 2.9 percent. This decrease reflects one-time factors which raised 2013–2014 revenues but did not recur this year.

Other taxes and duties increased by $1.0 billion, or 2.3 percent. GST revenues grew by $0.4 billion in 2014–2015, or 1.1 percent, while energy taxes grew by $42 million, or 0.8 percent. Customs import duties and other excise taxes and duties each increased by $0.3 billion.

EI premium revenues increased by $0.8 billion, or 3.7 percent, reflecting growth in insurable earnings.

Other revenues increased by $1.2 billion, or 4.1 percent, in 2014–2015, largely reflecting an increase in revenues from Crown corporations, offset in part by a decrease in interest and penalties.

Expenses

Federal expenses can be broken down into three main categories: transfer payments, which account for over half of all federal spending, other program expenses and public debt charges. Within these three main categories, the largest major component of expenses in 2014–2015 was major transfers to persons, which made up 27.3 percent of total expenses. This category consists of elderly benefits, EI benefits, the Canada Child Tax Benefit and the Universal Child Care Benefit. The second largest component of expenses was ministries expenses, which accounted for 25.5 percent of total expenses. Ministries expenses represent the operating expenses of more than 100 government departments and agencies, including National Defence. Major transfers to other levels of government — which include the Canada Health Transfer, the Canada Social Transfer, fiscal arrangements (Equalization, transfers to the territories, a number of smaller transfer programs and the Quebec Abatement), transfers to provinces on behalf of Canada's cities and communities, and other transfers — made up 22.5 percent of total expenses in 2014–2015. Other transfer payments, which include transfers to Aboriginal peoples, assistance to farmers, students and businesses, support for research and development, and foreign aid and international assistance, made up 12.5 percent of expenses, while Crown corporations accounted for 2.7 percent of total expenses. Public debt charges made up the remaining 9.5 percent of total expenses in 2014–2015.

Composition of Expenses for 2014–2015

Composition of Expenses for 2014–2015. Refer to the text description following the image.

Image Description The graph "Composition of Expenses" illustrates the composition of expenses for the current year and their relative percentage to the total expenses. The components are: Major transfers to persons 27.3%; Major transfers to other levels of government 22.5%; Other transfer payments 12,5%; Ministries 25.5%; Crown corporations 2.7%; and Public debt charges 9.5%.

There has been a large shift in the composition of total expenses since the early 1990s. Public debt charges were the largest component for most of the 1990s, given the large and increasing stock of interest‑bearing debt and high average effective interest rates on that stock of debt. Since reaching a high of nearly 30 percent of total expenses in 1996–1997, the share of public debt charges in total expenses has fallen by two‑thirds.

Public Debt Charges

Public Debt Charges. Refer to the text description following the image.

Image Description The graph "Public Debt Charges" illustrates the public debt charges as a percentage of total expenses since 1990–1991. The percentage for 1990–1991 is 29.32; 1991–1992 is 27.69; 1992–1993 is 25.28; 1993–1994 is 24.69; 1994–1995 is 26.39; 1995–1996 is 29.02; 1996–1997 is 29.81; 1997–1998 is 27.31; 1998–1999 is 27.11; 1999–2000 is 26.76; 2000–2001 is 25.16; 2001–2002 is 22.54; 2002–2003 is 20.26; 2003–2004 is 18.88; 2004–2005 is 16.21; 2005–2006 is 16.16; 2006–2007 is 15.28; 2007–2008 is 14.31; 2008–2009 is 12.97; 2009–2010 is 10.73; 2010–2011 is 11.41; 2011–2012 is 11.27; 2012–2013 is 10.50; 2013–2014 is 10.19; and 2014–2015 is 9.48.

The interest ratio (public debt charges as a percentage of revenues) has been decreasing in recent years, falling from a peak of 37.6 percent in 1990–1991 to 10.4 percent in 2013–2014. The ratio continued to fall in 2014–2015, reaching 9.4 percent. This means that, in 2014–2015, the Government spent approximately 9 cents of every revenue dollar on interest on the public debt.

Interest Ratio

Interest Ratio. Refer to the text description following the image.

Image Description The graph "Interest Ratio" illustrates the public debt charges as a percentage of revenues since 1990–1991. The percentage for 1990–1991 is 37.6; 1991–1992 is 34.8; 1992–1993 is 33.2; 1993–1994 is 32.4; 1994–1995 is 33.8; 1995–1996 is 35.2; 1996–1997 is 31.5; 1997–1998 is 26.8; 1998–1999 is 26.2; 1999–2000 is 24.6; 2000–2001 is 22.6; 2001–2002 is 21.6; 2002–2003 is 19.6; 2003–2004 is 18.0; 2004–2005 is 16.1; 2005–2006 is 15.2; 2006–2007 is 14.4; 2007–2008 is 13.7; 2008–2009 is 13.3; 2009–2010 is 13.5; 2010–2011 is 13.0; 2011–2012 is 12.5; 2012–2013 is 11.2; 2013–2014 is 10.4; and 2014–2015 is 9.4.

Expenses Compared to 2013–2014

Total expenses amounted to $280.4 billion in 2014–2015, up $3.6 billion, or 1.3 percent, from 2013–2014.

The following table compares total expenses for 2014–2015 to 2013–2014.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of expenses. It consists of four columns: the listing of expenses; current year; previous year; Change, divided into two columns — Absolute and %. The first series of rows presents transfer payments. The second series of rows presents other program expenses. The third series of rows contains three rows: Program expenses; Public debt charges; and Total expenses.

(in millions of dollars)

Expenses

  2014–2015 2013–2014 Change
Absolute Percent
%
Transfer payments —        
Major transfers to persons —        
Elderly benefitsLink to footnote 3 44,103 41,786 2,317 5.5
Employment insurance benefits 18,052 17,300 752 4.3
Children's benefits 14,303 13,136 1,167 8.9
Total 76,458 72,222 4,236 5.9
Major transfers to other levels of government —        
Federal transfer support for health and other social programs 44,696 42,758 1,938 4.5
Fiscal arrangements and other transfers 18,413 17,717 696 3.9
Total 63,109 60,475 2,634 4.4
Other transfer payments 35,126 36,698 (negative 1,572) (negative 4.3)
Total transfer payments 174,693 169,395 5,298 3.1
Other program expenses —        
Crown corporations 7,590 7,484 106 (negative 1.4)
Ministries 71,558 71,728 (negative 170) (negative 0.2)
Total other program expenses 79,148 79,212 (negative 64) (negative 0.1)
Program expenses 253,841 248,607 5,234 2.1
Public debt charges 26,594 28,220 (negative 1,626) (negative 5.8)
Total expenses 280,435 276,827 3,608 1.3

Major transfers to persons increased by $4.2 billion in 2014–2015, reflecting increases in elderly, children's and EI benefits. Elderly benefits increased by $2.3 billion, or 5.5 percent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. This increase also reflects the accrual of retroactive benefit payments. Children's benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit, increased by $1.2 billion, due mainly to the accrual of benefits related to the expansion and enhancement of the Universal Child Care Benefit for the January to March 2015 period. EI benefits increased by $0.8 billion in 2014–2015, reflecting higher average regular benefits, as well as increased special benefits (e.g. for maternity, parental and sickness purposes).

Major transfers to other levels of government increased by $2.6 billion in 2014–2015, primarily reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.

Other transfer payments decreased by $1.6 billion, or 4.3 percent, in 2014–2015, largely reflecting the one-time accrual in 2013–2014 of a liability for disaster assistance related to the 2013 flood in Alberta as well as decreases in spending across a number of departments in 2014–2015. These decreases were offset in part by an increase in Aboriginal claims expenses.

Other program expenses decreased from $79.2 billion in 2013–2014 to $79.1 billion in 2014–2015, down $0.1 billion, or 0.1 percent. This spending component consists of operating expenses of Crown corporations, departments and agencies, including National Defence, as well as expenses related to the periodic reassessment of estimates and assumptions underlying the valuation of government assets and liabilities. Within this component, expenses of consolidated Crown corporations increased by $0.1 billion, or 1.4 percent, and operating expenses of departments and agencies decreased by $0.2 billion, or 0.2 percent.

Public debt charges decreased by $1.6 billion, or 5.8 percent, reflecting a lower average effective interest rate on the stock of interest‑bearing debt.

Comparison of Actual Results to Budget Projections

Comparison to April 2015 Budget Plan

The $1.9‑billion surplus recorded in 2014–2015 represents a $3.9 billion improvement over the $2.0‑billion deficit projected in the April 2015 Budget. Revenues were $3.0 billion (1.1 percent) higher than expected, primarily reflecting gains in personal and corporate income tax revenues.

Program expenses were $0.8 billion lower than forecast, largely reflecting lower‑than‑expected direct program expenses, which are comprised of other transfer payments and other program expenses. This is attributed in part to a higher‑than‑expected lapse of departmental spending authorities.

Public debt charges in 2014–2015 were $0.1 billion lower than forecast in the April 2015 budget, reflecting a lower‑than‑expected average interest rate on the stock of interest bearing debt.

Table Summary

The table presents, in millions of dollars, a comparison of the current year actual results to budget projections. It consists of four columns: listing of main items; Projection; Actual; Difference. A final row presents the annual deficit.

(in millions of dollars)

Comparison of 2014–2015 Outcomes to April 2015 Budget

  Projection Actual Difference
Revenues 279,323 282,346 3,023
Expenses —      
Program expenses 254,632 253,841 (negative 791)
Public debt charges 26,689 26,594 (negative 95)
Total expenses 281,321 280,435 (negative 886)
Annual deficit or (surplus) 1,998 (negative 1,911) (negative 3,909)

Comparison to February 2014 Budget Plan

The 2014–2015 budgetary surplus represents a $4.0 billion improvement over the $2.1‑billion deficit forecast in the February 2014 Budget, primarily reflecting higher‑than‑forecast revenues.

Revenues were $6.0 billion (2.2 percent) higher than forecast in the February 2014 budget, primarily reflecting stronger‑than‑expected growth in other revenues. Other revenues grew more than projected due in large part to foreign exchange gains, stronger‑than‑expected revenues from Crown corporations, and gains from asset sales in excess of amounts provisioned at the time of the Budget (including the fiscal gain realized on the transfer to Ontario of the Province's one‑third portion of the Government's holdings of General Motors shares and spectrum auction revenues).

Total expenses were $2.0 billion higher than projected in the February 2014 budget.

Major transfers to persons were $1.8 billion higher than projected, almost entirely due to the introduction of the enhanced Universal Child Care Benefit. The February 2014 budget did not include any projections for the enhancement, which was announced in October 2014 and was effective January 2015.

Major transfers to other levels of government were $0.6 billion higher than forecast due to a lower‑than‑forecast value for the Quebec Abatement and also due to the settlement of an outstanding Stabilization claim with Quebec.

Direct program expenses, which are comprised of other transfer payments, Crown corporation expenses and Ministries' expenses, were $1.3 billion higher than projected in the February 2014 budget. Higher-than-expected direct program expenses were entirely due to Crown corporation expenses, which were $1.3 billion higher than expected. Other transfer payments, which were $0.7 billion lower than forecast, were offset by Ministries' operating expenses, which were $0.6 billion higher than forecast.

The higher-than-expected Crown corporation expenses were largely due to expenses of the Canadian Commercial Corporation, a Crown corporation that signed new defence export contracts, which resulted in both higher expenses and revenues. This was reflected in the April 2015 budget forecast.

Public debt charges in 2014–2015 were $1.6 billion lower than forecast in the February 2014 budget, largely reflecting a lower‑than‑expected average effective interest rate on the stock of market debt and lower adjustments on Real Return Bonds resulting from lower‑than‑expected inflation.

Table Summary

The table presents, in millions of dollars, the comparison of the current year outcomes to the February 2014 Budget. It consists of four columns: the listing of financial reporting accounts; Budgets; Actual; Difference. The first series of rows presents the Revenues. The second series of rows presents the Expenses. A final row presents the Annual deficit.

(in millions of dollars)

Comparison of 2014–2015 Outcomes to February 2014 Budget

  BudgetLink to footnote 4 Actual Difference
Revenues —      
Income tax revenues 180,405 181,406 1,001
Other taxes and duties 47,049 47,182 133
Employment insurance premiums 22,655 22,564 (negative 91)
Other revenues 26,229 31,194 4,965
Total revenues 276,338 282,346 6,008
Expenses —      
Program expenses      
Major transfers to persons 74,678 76,458 1,780
Major transfers to other levels of government 62,559 63,109 550
Other transfer payments 35,812 35,126 (negative 686)
Other program expenses 77,192 79,148 1,956
Total program expenses 250,241 253,841 3,600
Public debt charges 28,175 26,594 (negative 1,581)
Total expenses 278,416 280,435 2,019
Annual deficit or (surplus) 2,078 (negative 1,911) (negative 3,989)

Accumulated Deficit

The accumulated deficit is the difference between the Government's total liabilities and total assets. The annual change in the accumulated deficit represents the annual budgetary balance plus other comprehensive income or loss. Other comprehensive income or loss is comprised of certain unrealized gains and losses on financial instruments and certain actuarial gains and losses related to pensions and other employee future benefits reported by enterprise Crown corporations and other government business enterprises. Based on the recommendations of the Public Sector Accounting Board, other comprehensive income or loss is not included in the Government's annual budgetary balance, but is instead recorded directly to the Government's Consolidated Statement of Accumulated Deficit and Consolidated Statement of Change in Net Debt.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the accumulated deficit. It consists of four columns: the listing of the accumulated deficit items; current year; previous year; Difference. A final row presents the accumulated deficit at end of year.

(in millions of dollars)

Accumulated Deficit

  2014–2015 2013–2014 Difference
Accumulated deficit at beginning of year 611,881 609,391 2,490
Annual (surplus) or deficit (negative 1,911) 5,150 (negative 7,061)
Other comprehensive loss or (income) 2,360 (negative 2,660) 5,020
Accumulated deficit at end of year 612,330 611,881 449

The accumulated deficit increased by $0.4 billion in 2014–2015, as the 2014–2015 budgetary surplus of $1.9 billion was more than offset by a $2.4 billion other comprehensive loss. The $2.4 billion other comprehensive loss reflects $0.5 billion in net unrealized losses on available‑for‑sale financial assets and $1.9 billion in net actuarial losses on pension and other employee future benefits recorded by enterprise Crown corporations and other government business enterprises.

As a percentage of GDP, the accumulated deficit has fallen from a post‑World War II peak of 67.1 percent at March 31, 1996 to 31.0 percent at March 31, 2015.

Graph - Accumulated Deficit

Accumulated Deficit. Refer to the text description following the image.

Image Description The graph "Accumulated deficit" illustrates the accumulated deficit since 1990–1991. The percentage for 1990–1991 is 54.7; 1991–1992 is 58.8; 1992–1993 is 62.9; 1993–1994 is 65.7; 1994–1995 is 66.6; 1995–1996 is 67.1; 1996–1997 is 65.8; 1997–1998 is 62.1; 1998–1999 is 59.2; 1999–2000 is 53.9; 2000–2001 is 47.4; 2001–2002 is 45.1; 2002–2003 is 42.8; 2003–2004 is 39.9; 2004–2005 is 37.3; 2005–2006 is 34.1; 2006–2007 is 31.4; 2007–2008 is 29.2; 2008–2009 is 28.2; 2009–2010 is 33.1; 2010–2011 is 33.1; 2011–2012 is 33.0; 2012–2013 is 33.3; 2013–2014 is 32.3; and 2014–2015 is 31.0.

As noted above, the accumulated deficit is the difference between the Government's total liabilities and total assets. Total liabilities include interest‑bearing debt and accounts payable and accrued liabilities. Total assets include both financial and non‑financial assets, the latter consisting primarily of capital assets. The following sections provide more details on each of these components.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of the Consolidated statement of financial position. It consists of four columns: the listing of the financial position items; current year; previous year; Difference. The first series of rows presents the liabilities. The second series of rows presents the financial assets. The following row presents the net debt — result of liabilities minus financial assets. A final row presents the accumulated deficit which is the result of net debt minus non‑financial assets.

(in millions of dollars)

Consolidated Statement of Financial Position

  2014–2015 2013–2014Link to footnote 5 Difference
Liabilities      
Accounts payable and accrued liabilities 123,631 111,730 11,901
Interest‑bearing debt —      
Unmatured debt 665,180 658,958 6,222
Pensions and other future benefits 228,804 225,121 3,683
Other liabilities 6,002 5,914 88
Total 899,986 889,993 9,993
Total liabilities 1,023,617 1,001,723 21,894
Financial assets      
Cash and accounts receivable 136,696 128,574 8,122
Foreign exchange accounts 85,018 72,262 12,756
Loans, investments and advances 113,681 117,635 (negative 3,954)
Public sector pension assets 1,263 938 325
Total financial assets 336,658 319,409 17,249
Net debt 686,959 682,314 4,645
Non‑financial assets 74,629 70,433 4,196
Accumulated deficit 612,330 611,881 449

Interest‑Bearing Debt

Interest‑bearing debt includes unmatured debt, or debt issued on the credit markets, obligations for pensions and other future benefits, and other liabilities. Unmatured debt, which includes fixed‑coupon marketable bonds, Real Return Bonds, treasury bills, retail debt (Canada Savings Bonds and Canada Premium Bonds), foreign‑currency‑denominated debt, and obligations related to capital leases, amounted to 73.9 percent of interest‑bearing debt at March 31, 2015. Obligations for pensions and other future benefits include obligations for: federal public sector pension plans; disability and associated benefits available to war veterans, current and retired members of the Canadian Forces and the Royal Canadian Mounted Police, their survivors and dependants; health care and dental plans available to retired employees and their dependants; accumulated sick leave entitlements; severance benefits; workers' compensation benefits; and other future benefit plans maintained by consolidated Crown corporations and other entities. Obligations for federal public sector pension plans made up 17.0 percent of interest-bearing debt and other employee and veteran future benefits accounted for an additional 8.4 percent of interest-bearing debt. The remaining 0.7 percent of interest‑bearing debt represents other interest‑bearing liabilities of the Government, which include deposit and trust accounts and other specified purpose accounts.

The share of total interest‑bearing debt represented by unmatured debt had been declining since the mid–1990s, as the Government was able to retire some of this debt. This trend reversed in 2008–2009 due to the increase in financial requirements stemming from the stimulus phase of the Economic Action Plan, as well as an increase in borrowings under the consolidated borrowing framework introduced in 2008. Under the consolidated borrowing framework, the Government finances all of the borrowing needs of the Canada Mortgage and Housing Corporation (CMHC), the Business Development Bank of Canada and Farm Credit Canada through direct lending in order to reduce overall borrowing costs and improve the liquidity of the government securities market.

Graph - Interest-Bearing Debt by Category for 2014–2015

Interest-Bearing Debt by Category for 2014–2015. Refer to the text description following the image.

Image Description The graph "Interest-Bearing Debt by Category" illustrates the category for the current year and the percentage to the total interest-bearing debt. The preceding text provides details of the graph. The percentage by category is as follows: Marketable bonds (Canadian currency) 54.2%; Treasury bills 15.1%; Other unmatured debt 4.6%; Pensions 17.0%; Other future benefits 8.4%; and Other liabilities 0.7%.

At March 31, 2015, interest‑bearing debt totalled $900.0 billion, up $10.0 billion from March 31, 2014. Within interest-bearing debt, unmatured debt increased by $6.2 billion, liabilities for pensions decreased by $0.5 billion, liabilities for other employee and veteran future benefits increased by $4.2 billion, and other liabilities increased by $0.1 billion.

The $6.2 billion increase in unmatured debt largely reflects a $4.3 billion increase in the value of cross-currency swaps due to exchange rate movements and a $1.1 billion increase in unamortized discounts and premiums on market debt.

The Bank of Canada and the Department of Finance manage the Government's unmatured debt and associated risks. The fundamental objective of the debt management strategy is to provide stable, low‑cost funding to meet the Government's financial obligations and liquidity needs. Details on the Government's debt management objectives and principles are tabled annually in Parliament through the Department of Finance's Debt Management Strategy.

Foreign holdings of the Government's unmatured debt are estimated at $172.9 billion, representing approximately 26.0 percent of the Government's total unmatured debt.

Foreign Holdings of Government of Canada Unmatured Debt

Foreign Holdings of Government of Canada Unmatured Debt. Refer to the text description following the image.

Image Description The graph "Foreign Holdings of Government of Canada Unmatured debt" illustrates foreign holdings of the Government's unmatured debt as a percentage of unmatured debt since 1990–1991. The percentage for 1990–1991 is 23.0; 1991–1992 is 24.3; 1992–1993 is 27.9; 1993–1994 is 27.7; 1994–1995 is 26.6; 1995–1996 is 26.6; 1996–1997 is 26.1; 1997–1998 is 25.4; 1998–1999 is 23.3; 1999–2000 is 21.8; 2000–2001 is 20.8; 2001–2002 is 17.0; 2002–2003 is 19.5; 2003–2004 is 13.9; 2004–2005 is 13.4; 2005–2006 is 14.2; 2006–2007 is 13.3; 2007–2008 is 13.0; 2008–2009 is 14.1; 2009–2010 is 16.3; 2010–2011 is 21.7; 2011–2012 is 25.3; 2012–2013 is 28.9; 2013–2014 is 25.5; and 2014–2015 is 26.0.

The Government's net liabilities for pensions and other future benefits stood at $227.5 billion at March 31, 2015, up $3.4 billion from the prior year. These net liabilities represent the estimated present value of future pension and other benefits earned to March 31, 2015 by current and former employees, net of the value of assets set aside to fund these obligations, as measured annually on an actuarial basis.

The following table illustrates the change in the Government's liabilities for pensions and other future benefits, net of public sector pension assets, in 2014–2015.

Table Summary

The table presents, in millions of dollars, the change in the total liabilities for pensions and other future benefits in the current year and its presentation on the Consolidated Statement of Financial Position. It consists of four columns: the listing of the liabilities items; Pensions; Other future benefits; Total. The first row presents the liabilities at beginning of year followed by different items which must be added and a row for the subtotal. The second series of rows presents the different items which must be deducted and a row for the subtotal. The following row presents the net (decrease) or increase in liabilities — result of the added items minus those deducted. The following row presents the Liabilities at end of year — result of liabilities at beginning of year plus the net (decrease) or increase in liabilities. The last series of rows presents the items presented on the Consolidated Statement of Financial Position. A final row presents the net future benefit liabilities.

(in millions of dollars)

Net future benefit liabilities

  Pensions Other future benefits Total
Net future benefit liabilities at beginning of yearLink to footnote 6 152,224 71,959 224,183
Add:      
Benefits earned during the year 6,602 2,844 9,446
Interest on the accrued benefit obligations, net of the expected return on investments 7,796 2,857 10,653
Actuarial losses recognized during the year 999 2,037 3,036
Plan amendments, curtailments and settlementsLink to footnote 7 (negative 57) 1,569 1,512
Subtotal 15,340 9,307 24,647
Deduct:      
Benefits paid by employer during the year 10,468 5,059 15,527
Transfers to the PSPIBLink to footnote 8 4,554   4,554
Transfers to external trustsLink to footnote 9 282 1 283
Net transfers to other plans and administrative expenses 859 66 925
Subtotal 16,163 5,126 21,289
Net (decrease) or increase (negative 823) 4,181 3,358
Net future benefit liabilities at end of year 151,401 76,140 227,541
Presented on the Consolidated Statement of Financial Position as:      
Public sector pension liabilities     152,664
Other employee and veteran future benefit liabilities     76,140
Total pension and other future benefit liabilities     228,804
Public sector pension assets     1,263
Net future benefit liabilities     227,541

The increase in net liabilities for pensions and other future benefits in 2014–2015 reflects the addition of $9.4 billion in future benefits earned by employees during the year as well as $10.7 billion in net interest charges on the liabilities. Accounting standards require that liabilities due a long time into the future be recorded at their estimated present, or discounted, value. For the Government's funded pension benefits, which relate to post–March 2000 service under its three main pension plans — the public service, Canadian Forces — Regular Force, and Royal Canadian Mounted Police pension plans — as well as benefits under the Canadian Forces — Reserve Force pension plan, the discount rate is based on the streamed expected rates of return on invested funds. For benefits related to pre–April 2000 service under these main plans, as well as benefits under several smaller plans sponsored by the Government, which are unfunded, the discount rate is based on the streamed weighted average of long‑term bond rates. For the Government's other future benefit plans, the discount rate reflects the expected long-term bond rate. Interest is recorded on the liabilities for pensions and other future benefits each year, net of the expected return on investments associated with funded benefits, to reflect the passage of time as the liabilities are one year closer to settlement. Net interest charges are recorded as part of public debt charges while benefits expense is recorded as part of ministries expenses on the Consolidated Statement of Operations and Accumulated Deficit.

The liabilities for pensions and other future benefits increased by an additional $3.0 billion in 2014–2015 due to the amortization of actuarial gains and losses. Actuarial gains and losses represent year‑over‑year increases or decreases in the estimated value of the Government's pension and other future benefit obligations and the value of related assets due to changes in actuarial assumptions or actual experience different from that previously estimated. Actuarial assumptions include future inflation, interest rates, return on investments, general wage increases, workforce composition, retirement rates and mortality rates. Under Canadian Public Sector Accounting Standards, which are set independently by the Public Sector Accounting Board, actuarial gains and losses are not recognized in the liabilities immediately but instead are amortized over the expected average remaining service life of plan contributors, which represents periods ranging from 4 to 23 years, according to the plan in question. As of March 31, 2015, the Government had net unamortized losses of $39.8 billion. These losses will be reflected over time in the liabilities and recorded as part of program expenses

The Government also recorded a $1.5 billion increase in liabilities for pensions and other future benefits to reflect the net impact of plan amendments, curtailments and settlements during the year. The largest of these amendments relates to improvements made to and the expansion of eligibility for certain benefits under the Government's veterans future benefit plans.

These increases were offset in part by reductions in the liabilities for benefits paid by the employer during the year ($15.5 billion) and for net transfers to the PSPIB for investment ($4.6 billion).

Further details on the federal public sector pension plans and other employee and veteran future benefits are contained in Section 6 of this volume.

Interest‑bearing debt stood at 45.6 percent of GDP in 2014–2015, down from 47.0 percent in 2013–2014. This ratio is down over 29 percentage points from its high of 74.6 percent in 1995–1996.

Graph - Interest-Bearing Debt

Interest-Bearing Debt. Refer to the text description following the image.

Image Description The graph "Interest-Bearing Debt" illustrates the percentage of interest-bearing debt on GDP since 1990–1991. The percentage for 1990–1991 is 62.7; 1991–1992 is 67.2; 1992–1993 is 70.8; 1993–1994 is 73.3; 1994–1995 is 73.4; 1995–1996 is 74.6; 1996–1997 is 74.1; 1997–1998 is 69.8; 1998–1999 is 67.1; 1999–2000 is 62.9; 2000–2001 is 56.9; 2001–2002 is 54.6; 2002–2003 is 52.1; 2003–2004 is 49.4; 2004–2005 is 45.8; 2005–2006 is 42.6; 2006–2007 is 40.3; 2007–2008 is 37.2; 2008–2009 is 43.1; 2009–2010 is 48.7; 2010–2011 is 48.2; 2011–2012 is 47.7; 2012–2013 is 49.0; 2013–2014 is 47.0; and 2014–2015 is 45.5.

The average effective interest rate on the Government's interest‑bearing debt in 2014–2015 was 3.0 percent, down from 3.2 percent in 2013–2014. The average effective interest rate on unmatured debt in 2014–2015 was 2.4 percent, while the average effective interest rate on pension and other liabilities was 4.7 percent. The average effective interest rate was higher on pension and other liabilities than on unmatured debt because the Government's unfunded pension liability is primarily credited with interest at rates that are calculated as though the amounts in the plans were invested in a notional portfolio of Government of Canada 20–year bonds held to maturity, whereas unmatured debt includes both short‑ and long‑term securities.

Average Effective Interest Rate on Interest-Bearing Debt

Average Effective Interest Rate on Interest-Bearing Debt. Refer to the text description following the image.

Image Description The graph "Average Effective Interest Rate on Interest-Bearing Debt" illustrates the percentage of the average effective interest rate on interest-bearing debt, unmatured debt, and pension and other liabilities since 1990–1991. The percentage for interest-bearing debt for 1990–1991 is 10.9; 1991–1992 is 9.7; 1992–1993 is 8.5; 1993–1994 is 7.7; 1994–1995 is 7.9; 1995–1996 is 8.3; 1996–1997 is 7.6; 1997–1998 is 6.8; 1998–1999 is 6.9; 1999–2000 is 6.9; 2000–2001 is 7.0; 2001–2002 is 6.4; 2002–2003 is 6.0; 2003–2004 is 5.8; 2004–2005 is 5.6; 2005–2006 is 5.6; 2006–2007 is 5.7; 2007–2008 is 5.6; 2008–2009 is 4.8; 2009–2010 is 4.0; 2010–2011 is 3.9; 2011–2012 is 3.8; 2012–2013 is 3.3; 2013–2014 is 3.1; and 2014–2015 is 2.9. For unmatured debt, the percentage for 1990–1991 is 11.3; 1991–1992 is 9.8; 1992–1993 is 8.3; 1993–1994 is 7.2; 1994–1995 is 7.5; 1995–1996 is 7.9; 1996–1997 is 7.6; 1997–1998 is 7.1; 1998–1999 is 7.1; 1999–2000 is 6.8; 2000–2001 is 6.9; 2001–2002 is 6.2; 2002–2003 is 5.7; 2003–2004 is 5.4; 2004–2005 is 5.0; 2005–2006 is 5.0; 2006–2007 is 5.1; 2007–2008 is 5.1; 2008–2009 is 4.1; 2009–2010 is 3.1; 2010–2011 is 3.1; 2011–2012 is 3.1; 2012–2013 is 2.6; 2013–2014 is 2.5; and 2014–2015 is 2.4. For pension and other liabilities, the percentage for 1990–1991 is 9.6; 1991–1992 is 9.6; 1992–1993 is 9.0; 1993–1994 is 9.1; 1994–1995 is 9.2; 1995–1996 is 9.5; 1996–1997 is 7.6; 1997–1998 is 6.0; 1998–1999 is 6.2; 1999–2000 is 7.2; 2000–2001 is 7.2; 2001–2002 is 6.9; 2002–2003 is 6.8; 2003–2004 is 6.9; 2004–2005 is 6.9; 2005–2006 is 6.9; 2006–2007 is 6.8; 2007–2008 is 6.7; 2008–2009 is 6.4; 2009–2010 is 6.3; 2010–2011 is 6.3; 2011–2012 is 5.8; 2012–2013 is 5.3; 2013–2014 is 5.0; and 2014–2015 is 4.6.

Accounts Payable and Accrued Liabilities

The following chart shows accounts payable and accrued liabilities by category for 2014–2015.

Accounts Payable and Accrued Liabilities by Category for 2014–2015

Accounts Payable and Accrued Liabilities by Category for 2014–2015. Refer to the text description following the image.

Image Description The Graph "Accounts Payable and Accrued Liabilities" illustrates the accounts payable and accrued liabilities by category and their relative percentage to the total. The components are: Amounts payable to taxpayers 45.5%; Deferred revenues 7.4%; Environmental liabilities 9.9%; Interest and matured debt 4.2%; Allowance for guarantees 0.3%; and Other accounts payable and accrued liabilities 32.7%.

The Government's accounts payable and accrued liabilities consist of amounts payable to taxpayers based on assessments and estimates of refunds owing for tax assessments not completed by year end; environmental liabilities, which include estimated costs related to the remediation of contaminated sites and the future retirement of certain tangible capital assets; deferred revenue; interest due and matured debt, as well as accrued interest at year end; an allowance for guarantees provided by the Government; and other accounts payable and accrued liabilities. Other accounts payable and accrued liabilities include items such as accrued salaries and benefits, amounts payable to provinces, territories and Aboriginal governments for taxes collected and administered on their behalf in accordance with tax collection agreements, and amounts owing at year end pursuant to contractual arrangements or for work performed or goods received.

At March 31, 2015, accounts payable and accrued liabilities totalled $123.6 billion, up $11.9 billion from March 31, 2014. This increase is mainly due to growth in other accounts payable and accrued liabilities, deferred revenue and amounts payable to taxpayers.

Other accounts payable and accrued liabilities increased by $2.3 billion in 2014–2015. Within this component, accrued salaries and benefits increased by $1.1 billion, due mainly to the implementation of a payment-in-arrears payroll practice for government employees in 2014–2015. Liabilities under provincial, territorial and Aboriginal tax agreements increased by $1.0 billion in 2014–2015 due to settlements of prior year's tax assessments and timing differences.

Deferred revenue increased by $5.2 billion in 2014–2015. This increase is due in large part to a combined $4.7 billion in license fees received in 2014–2015 under the 700 megahertz wireless spectrum auction and Advanced Wireless Services auction. These fees will be recognized as other program revenues on a straight-line basis over the 20‑year terms of the licenses.

Amounts payable to taxpayers increased by $3.6 billion in 2014–2015, from $52.6 billion at March 31, 2014 to $56.2 billion at March 31, 2015.

Environmental liabilities increased by $1.2 billion in 2014–2015, reflecting an increase in the estimated future costs related to remediation of contaminated sites.

Liabilities for interest and matured debt decreased by $0.3 billion from the prior year, reflecting lower interest rates, while allowances for guarantees provided by the Government decreased by $0.1 billion.

Financial Assets

Financial assets include cash on deposit with the Bank of Canada, chartered banks and other financial institutions, accounts receivable, foreign exchange accounts, loans, investments and advances, and public sector pension assets of consolidated Crown corporations and other entities. The Government's foreign exchange accounts include foreign currency deposits, investments in gold, and subscriptions and loans to the International Monetary Fund. Proceeds of the Government's foreign currency borrowings are held in the Exchange Fund Account to provide foreign currency liquidity and provide funds needed to promote orderly conditions for the Canadian dollar in the foreign exchange markets. Further details on the management of international reserves are available in the Government's annual Report on the Management of Canada's Official International Reserves. The Government's loans, investments and advances include its investments in and loans to enterprise Crown corporations, loans to national governments mainly for financial assistance and development of export trade, and loans under the Canada Student Loans Program.

Financial Assets by Category for 2014–2015

Financial Assets by Category for 2014–2015. Refer to the text description following the image.

Image Description The Graph "Financial Assets by Category" illustrates the financial assets by category for the current year and their relative percentage to the total. The components are: Cash and cash equivalents 10.4%; Taxes receivable 29.3%; Other accounts receivable 0.9%; Foreign exchange accounts 25.2%; Loans, investments and advances 33.8%; and Public sector pension assets 0.4%.

At March 31, 2015, financial assets amounted to $336.7 billion, up $17.2 billion from March 31, 2014. The increase in financial assets largely reflects an increase in the Government's foreign exchange accounts and an increase in taxes and other accounts receivable.

At March 31, 2015, cash and cash equivalents totalled $35.0 billion, up $3.6 billion from March 31, 2014. Included in the March 31, 2015 balance of cash and cash equivalents is $20 billion which has been designated as a deposit held at the Bank of Canada with respect to prudential liquidity management. The Government's overall liquidity is maintained at a level sufficient to cover at least one month of net projected cash flows, including coupon payments and debt refinancing needs.

Taxes receivable increased by $6.0 billion during 2014–2015 to $98.5 billion, while other accounts receivable decreased by $1.5 billion.

Foreign exchange accounts increased by $12.8 billion in 2014–2015, totalling $85.0 billion at March 31, 2015. The increase in foreign exchange accounts is due mainly to growth in foreign exchange reserves held in the Exchange Fund Account, primarily reflecting $8.4 billion in net additional advances to the Account during the year and $5.4 billion in foreign exchange gains. Under the Government's prudential liquidity plan, liquid foreign exchange reserves will continue to rise sufficiently to maintain their level at or above 3 percent of GDP.

Loans, investments and advances to enterprise Crown corporations and other government business enterprises decreased by $5.4 billion in 2014–2015. Net loans and advances decreased by $7.9 billion due mainly to the repayment of principal on assets maturing under the Insured Mortgage Purchase Program (IMPP) administered by Canada Mortgage and Housing Corporation (CMHC), while investments in Crown corporations and other government business enterprises increased by $2.5 billion. This $2.5 billion increase reflects $8.4 billion in net profits recorded by these corporations and enterprises during 2014–2015, offset in part by $2.4 billion in other comprehensive losses and $3.5 billion in dividends paid to the Government and other equity transactions.

Other loans, investments and advances increased by $1.5 billion, from $22.8 billion to $24.3 billion.

Public sector pension assets increased by $0.3 billion.

Since the accumulated deficit reached its post‑World War II peak of 67.1 percent of GDP at March 31, 1996, financial assets have increased by $244.0 billion reflecting higher levels of cash and cash equivalents and accounts receivable (up $84.1 billion), an increase in the foreign exchange accounts (up $66.0 billion), and an increase in loans, investments and advances (up $92.7 billion). The increase in cash and cash equivalents and accounts receivable is largely attributable to growth in taxes receivable, broadly in line with the growth in the applicable tax bases. The increase in the foreign exchange accounts reflects a decision by the Government in the late 1990s and more recently in the 2011–2012 Debt Management Strategy to increase liquidity in these accounts. The increase in loans, investments and advances is attributable to several factors including the accumulation of net profits from enterprise Crown corporations, the Government taking over the financing of the Canada Student Loans Program from the chartered banks in 2000, and the issuance of direct loans to Crown corporations under the Government's consolidated borrowing framework implemented in 2008.

Net Debt

The Government's net debt — its total liabilities less financial assets — stood at $687.0 billion at March 31, 2015. Net debt was 34.8 percent of GDP, down 1.2 percentage points from a year earlier, and 37.7 percentage points below its peak of 72.5 percent at March 31, 1996.

This ratio measures debt relative to the ability of the country's taxpayers to finance it. Total liabilities are reduced only by financial assets as non‑financial assets cannot normally be converted to cash to pay off the debt without disrupting government operations.

Graph - Net Debt

Net Debt. Refer to the text description following the image.

Image Description The Graph "Net Debt" illustrates the net debt as a percentage of GDP since 1990–1991. The percentage for 1990–1991 is 59.5; 1991–1992 is 64.0; 1992–1993 is 68.3; 1993–1994 is 71.2; 1994–1995 is 72.1; 1995–1996 is 72.5; 1996–1997 is 71.2; 1997–1998 is 67.4; 1998–1999 is 64.4; 1999–2000 is 58.9; 2000–2001 is 52.1; 2001–2002 is 49.8; 2002–2003 is 47.4; 2003–2004 is 44.3; 2004–2005 is 41.5; 2005–2006 is 38.1; 2006–2007 is 35.2; 2007–2008 is 33.0; 2008–2009 is 31.9; 2009–2010 is 37.2; 2010–2011 is 37.1; 2011–2012 is 36.8; 2012–2013 is 37.0; 2013–2014 is 36.0; and 2014–2015 is 34.8.

Canada Has the Lowest Total Government Net Debt Burden Among G‑7 Countries

G‑7 Total Government Net Debt, 2014

G-7 Total Government Net Debt, 2014. Refer to the text description following the image.

Image Description The Graph "G‑7 Total Government Net Debt for 2014" illustrates the G‑7 net debt-to-GDP ratio as a percentage of GDP by country. The percentage for Canada is 40.4; Germany is 46.2; United Kingdom is 76.3; France is 78.1; United States is 85.8; Italy is 131.1; and Japan is 128.7. The G‑7 average Link to footnote * is 86.8.

Footnote *Weighted by GDP on a Purchasing Power Parity (PPP) basis.
Source: OECD Economic Outlook, No. 97 (June 2015).

Canada's total government net debt‑to‑GDP ratio stood at 40.4 percent in 2014, according to the OECD. This is the lowest level among G‑7 countries, which the OECD estimates will record an average net debt of 86.8 percent of GDP in that same year.

International comparisons of net debt are made on a total government, National Accounts basis, which for Canada includes the net debt of federal, provincial/territorial and local governments, as well as the net assets held in the Canada Pension Plan and Quebec Pension Plan.

Non‑Financial Assets

Non‑financial assets include the net book value of the Government's tangible capital assets, which include land, buildings, works and infrastructure such as roads and bridges, machinery and equipment, ships, aircraft and other vehicles. Non‑financial assets also include inventories and prepaid expenses and other non‑financial assets.

Non-Financial Assets by Category for 2014–2015

Non-Financial Assets by Category for 2014–2015. Refer to the text description following the image.

Image Description The Graph "Non-Financial Assets by Category" illustrates the non‑financial assets by category for the current year and their relative percentage to the total. The components are: Prepaid expenses 5.4%; Inventories 9.7%; Land 2.2%; Buildings 19.3%; Works and infrastructure 8.4%; Machinery and equipment 12.5%; Vehicles 19.1%; and Other capital assets 23.4%.

At March 31, 2015, non‑financial assets stood at $74.6 billion, up $4.2 billion from a year earlier. Of this growth, $1.4 billion relates to an increase in tangible capital assets while $2.9 billion relates to an increase in prepaid expenses and other non‑financial assets. This latter increase is due mainly to growth in advances and progress payments to Canadian exporters made by the Canadian Commercial Corporation.

At March 31, 2015, roughly 61 percent of the original cost of the Government's depreciable tangible capital assets had been amortized, unchanged from a year earlier. Depreciable tangible capital assets exclude land, and assets under construction which are not yet available for use.

Tangible Capital Asset Cost and Accumulated Amortization

Tangible Capital Asset Cost and Accumulated Amortization. Refer to the text description following the image.

Image Description The Graph "Tangible Capital Asset Cost and Accumulated Amortization" illustrates, in billions of dollars, the tangible capital asset cost and accumulated amortization for the current year. The components are: Land — Cost 1.605 and Accumulated Amortization 0; Buildings — Cost 29.350 and Accumulated Amortization 14.936; Works and Infrastructure — Cost of 14.549 and Accumulated Amortization 8.276, Machinery and equipment — Cost 34.925 and Accumulated Amortization 25.612; Vehicles — Cost 37.623 and Accumulated Amortization 23.388; Leasehold improvements — Cost 3.116 and Accumulated Amortization 1.910; Assets under construction — Cost 13.359 and Accumulated Amortization 0; Assets under capital leases — Cost of 4.861 and Accumulated Amortization 1.919.

Cash Flow

The annual surplus or deficit is presented on an accrual basis of accounting, recognizing revenue in the period it is earned and expenses when incurred, regardless of when the associated cash is received or paid. In contrast, the Government's net cash flow measures the difference between cash coming in to the Government and cash going out.

In 2014–2015, the Government had a total cash source of $3.2 billion before financing activities, compared to a total cash source of $23.2 billion before financing activities in 2013–2014. Operating activities resulted in a net cash requirement of $0.1 billion in 2014–2015, compared to a net cash requirement of $14.5 billion in 2013–2014, reflecting in part the improvement in the budgetary balance. Cash used by capital investment activities totalled $5.9 billion in 2014–2015, down from $6.3 billion last year. Cash provided by investing activities decreased by $34.8 billion, from $44.0 billion in 2013–2014 to $9.2 billion in 2014–2015, reflecting the wind-down of repayments of principal on assets maturing under the IMPP.

Table Summary

The table presents, in millions of dollars, a two‑year comparative of cash flow by major components related to cash coming in to the Government and cash going out. It consists of three columns: the listing of components; current year; previous year. The first series of rows presents the cash used before financing activities followed by the total. The second series of rows contains two rows: Cash provided or (used) by financing activities; Net increase in cash — result from the addition of the total of the first series of rows and Cash provided or (used) by financing activities. The third and last series of rows presents the cash and cash equivalents at beginning of year and at end of year — result from Cash and cash equivalents at beginning of year and Net increase in cash.

(in millions of dollars)

Cash Flow

  2014–2015 2013–2014
Cash used by operating activities (negative 103) (negative 14,520)
Cash used by capital investment activities (negative 5,850) (negative 6,254)
Cash provided by investing activities 9,156 43,989
Total cash provided before financing activities 3,203 23,215
Cash provided or (used) by financing activities 367 (negative 19,127)
Net increase in cash 3,570 4,088
Cash and cash equivalents at beginning of year 31,429 27,341
Cash and cash equivalents at end of year 34,999 31,429

Financing activities generated an additional $0.4 billion source of cash in 2014–2015, resulting in an overall net increase in cash of $3.6 billion. The level of cash and cash equivalents stood at $35.0 billion at March 31, 2015.

Risks and Uncertainties

As noted in the budget and related documents, the Government's revenues and expenses are highly sensitive to changes in economic conditions — particularly to changes in economic growth, inflation and interest rates.

To illustrate the impact of changes in economic conditions, the Department of Finance publishes, on a regular basis, sensitivity impacts on the budgetary balance. These are "rules of thumb" as the actual impact will depend on many other factors as well. As published in the April 21, 2015 budget, these show, for example, that:

  • A one‑year, 1‑percentage‑point decrease in real GDP growth would lower the budgetary balance by $4.1 billion in the first year, $4.7 billion in the second year, and $5.2 billion in the fifth year.
  • A one‑year, 1‑percentage‑point decrease in GDP inflation would lower the budgetary balance by $1.9 billion in the first year, $1.7 billion in the second year, and $1.5 billion in the fifth year.
  • A sustained 100‑basis‑point increase in interest rates would lower the budgetary balance by $0.5 billion in the first year, $1.2 billion in the second year, and $2.0 billion in the fifth year.

While these generalized rules of thumb provide good estimates of the sensitivity of the budgetary balance to small economic changes, it is important to note that some of the estimated relationships would change in response to large economic changes.

Footnotes

Footnote 1

This section incorporates data available up to and including August 10, 2015.

Return to footnote 1 referrer

Footnote 2

Certain comparative figures have been reclassified to conform to the current year's presentation.

Return to footnote 2 referrer

Footnote 3

Elderly benefits consist of old age security benefits, guaranteed income supplement and spouse's allowance.

Return to footnote 3 referrer

Footnote 4

To enhance comparability with actual 2014–2015 results, Budget 2014 amounts have been restated to reflect the change in the Government's accounting policy for bond buy‑back operations in 2013–2014. This restatement has resulted in an $800 million decrease in budgeted public debt charges and a corresponding decrease in the budgeted 2014–2015 annual deficit.

Return to footnote 4 referrer

Footnote 5

Certain comparative figures have been reclassified to conform to the current year's presentation.

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Footnote 6

A significant class of pension and other future benefits related to consolidated Crown corporations and other entities was reclassified from other accounts payable and accrued liabilities to public sector pensions and other future benefits.

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Footnote 7

Amounts shown include actuarial gains and losses recognized immediately upon a plan amendment, settlement or curtailment.

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Footnote 8

With respect to the Government's funded pension plans, amounts equal to employer and employee contributions or Government and member contributions less benefits and other payments are transferred to the PSPIB for investment.

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Footnote 9

Funds related to pension and other future benefit plans of consolidated Crown corporations and other entities are held in legally separate external trusts.

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