Halloween is scary, but so is April Fools

The federal government’s fiscal year begins each April Fool’s Day. There is a ton of work done before the Minister of Finance gets up in the House and tells us how our money will be spent for the year from April 1, 2023 to March 31, 2024.
Currently, the House of Commons Finance Committee is talking privately with selected Canadians to hear suggestions for next year’s budget – the pre-budget consultations. Then, around April Fool’s Day, the Minister of Finance will present the government’s plans for fiscal, economic and social policy — the budget. Then, in the House of Commons, there will be an all-party debate about whether to approve the budget. With the configuration of political parties in the House, there is little chance that the budget will be defeated.
What is approved is not the end. There might be unforeseen events that will require more spending. Thus, usually three times a year, in November, February and May, the government publishes supplementary budgets which must also be approved by Parliament.
If you’re not careful, it’s more than a little confusing. Because while some officials and politicians are thinking and talking about NEXT year’s budget, others are putting the finishing touches on a report on LAST year’s budget. Soon, this month or next, you’ll hear about how much revenue Ottawa actually collected and how much it actually spent in the last fiscal year.
The Financial Administration Act requires the Minister of Finance to table a report on how much the government expects to borrow in the coming fiscal year, including why the money will be borrowed and how the debt will be managed. This is important because everyone wants to be able to borrow money when they need it at the lowest possible rates. So, just like people, governments must show that they are debt-free and that they are bringing in enough money to be able to pay the interest on the debt and possibly the principal itself.
In 2022, the federal debt per person is projected to be $47,070, the third highest amount in Canadian history (behind only 2020 and 2021). That’s more than 25% higher than debt per person before COVID in 2019. Despite this, global rating agencies like Moody’s and Fitch give Canada an AA+ for its “well-regulated financial markets, monetary and fiscal flexibility.” and its economic resilience.
Good for us. Indeed, so good for us that a few months ago, when interest rates were in the 1.5-2% range, the Bank of Canada canceled a planned sale of long-term bonds which were due to expire in 2064. She did, she said. , because Canada’s borrowing needs declined while its balance sheet improved due to higher inflation. The government has the authority to borrow an additional $513 billion for 2022-23, or $131,852 on behalf of each of us. The Minister of Finance thinks she will only borrow $435 billion, or only $111,825/person. If she’s wrong, interest rates are double what they were a few months ago.
We now know that high amounts of federal debt can also cause the government to raise taxes in the future, which imposes the cost of past spending on future generations. If Canada is in such good financial health compared to other countries, what does that say about them? Several countries, including the UK, are already struggling to borrow money. Is a global credit crunch in our future?

Dian Cohen, CM, OM, Economist
[email protected]

Subscribe now for the full story and more

Comments are closed.