The Devil’s in the Details: What the Fiscal Monitor Tells Us about the State of Federal Finances

Once again, the federal Fiscal Monitor for March implied the Government of Canada ran a much bigger deficit last year than was published in the budget, at $50.9B versus $40B respectively. Federal debt is estimated to have been similarly higher, seemingly corroborating this estimate. As such, it’s no surprise that some fiscal analysts may be tempted to accept this as fiscal fact.

However, the March Fiscal Monitor often misses the mark for a few reasons. First, personal income tax (PIT) revenues almost always come in higher than estimated in the Fiscal Monitor. Second, other transfer payments are also often higher, providing an offset to greater PIT. While these adjustments aren’t always a wash, we think they largely will be in the 2023–24 fiscal year. Finally, the Fiscal Monitor doesn’t correct for the final audited numbers in the prior fiscal year.

Taken together, we think this points to a deficit between $40B and $45B last year—slightly larger than estimated in Budget 2024 but smaller than suggested in the March 2024 Fiscal Monitor.

But regardless of the size of the deficit, all measures of federal debt came in modestly higher than expected in both Budget 2024 and the prior fiscal year—in absolute terms and relative to GDP. This is a cautionary sign for a government hoping to demonstrate fiscal prudence.