Financial statements discussion and analysis

Public Accounts of Canada 2024 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. Supplementary discussion and analysis of the financial results can be found in the Annual Financial Report of the Government of Canada—Fiscal Year 2023–2024, available on the Department of Finance Canada's website.

The consolidated financial statements and financial statements discussion and analysis 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 and financial statements discussion and analysis rests with the government. A glossary of terms used in this financial statements discussion and analysis is provided at the end of this section.

2024 financial highlights

Accounting for Future Possible Developments

Since Budget 2024, the government identified significantly higher contingent liabilities, that is, possible obligations that have been assessed as likely to result in a future payment. While there were no payments associated with these new liabilities in the 2024 fiscal year, the federal government is following Canadian public sector accounting standards by transparently accounting for these estimated contingent liabilities in the 2024 financial results.

In 2024, the government recorded expenses totaling approximately $16.4 billion related to Indigenous contingent liabilities, in advancing its commitment to resolve past injustices and renew its relationship with Indigenous Peoples. In addition, the government recorded expenses totaling $4.7 billion related to COVID-19 pandemic expenses. Absent these expenses, the 2024 budgetary deficit would have been roughly $40.8 billion.

Budget 2024 projected revenues of $465.1 billion for the fiscal year ending March 2024, underpinned by economic data and strong year-to-date revenue results. Revenues for 2024 are $5.5 billion lower compared to the projection, due to lower tax revenue, consistent with the softening of the economy from higher interest rates as the Bank of Canada has returned inflation to 2%. This is a variance of 1.2% on total revenue of over $459.5 billion.

Budget 2024 projected total expenses of $505.1 billion for the fiscal year ending March 2024. Actual expenses were $16.3 billion2 higher than forecast in Budget 2024, due mainly to two factors:

The expense variance largely reflects the assessment and re-assessment by the government of assets and liabilities as required under its accrual accounting framework. That is, these are impacts from past transactions or in anticipation of possible future developments versus new in-year government spending.

Future Potential Payments to Resolve Indigenous Claims

The federal government is advancing reconciliation, supporting Indigenous Peoples' right to self-determination, and addressing historical wrongs and systemic racism. Since 2016, the government has provided over $60 billion to resolve Indigenous claims. Efforts are ongoing to resolve Indigenous claims, including through the prioritization of negotiations and work to resolve litigation out-of-court. These efforts have contributed to an increase in both the number and value of settlements in recent years.

"Contingent liabilities can be defined as possible obligations that may result in future payments when one or more future events occur or fail to occur. These events may not wholly be within the control of the government but may arise during the normal course of operations."

Parliamentary Budget Officer (PBO), July 2024

When the probability of a future payment is considered likely, and the amount can be estimated, the government records a provision for the contingent liability. The government cannot estimate with certainty when potential future contingent liabilities would be paid, or if they would be paid at all, as settlements are matters being negotiated with other parties or are before the courts.

"The current stock of the outstanding provision for contingent liabilities, as of March 31, 2023, is $76 billion. This amount has increased significantly in recent years, with an average annual growth of roughly 30 per cent since 2016."

PBO, July 2024

As part of advancing its commitment to resolve past injustices by accelerating the resolution of Indigenous claims, the government recorded expenses of $17.8 billion in 2024, of which $16.4 billion is related to contingent liabilities for Indigenous claims. The remainder represents settlement payments not previously charged to expenses.

Emergency Pandemic Support for Canadians and Small Businesses

During the pandemic, the government delivered unprecedented programs to support the hardest-hit Canadians and businesses to weather the COVID-19 recession. The government secured a national supply of vital vaccines to reopen the economy as soon as possible. The Canada Recovery Benefit provided financial support to employed and self-employed Canadians who were directly affected by COVID-19 during public health restrictions. The Canada Emergency Business Account provided interest-free, partially forgivable loans to nearly 900,000 small business and not-for-profit organizations. The federal government supported Canadians when they needed it the most.

This support was crucial to Canada's remarkable economic resilience and recovery—and it did involve significant financial costs. While largely now passed, there is a diminishing amount of pandemic legacy costs. The government has recorded $1.2 billion in 2024 for the write-down by the Public Health Agency of Canada of expired COVID-19 vaccines and therapeutics. In addition, a $3.5-billion provision in 2024 has been recorded for loans and receivables related to the emergency support which kept Canadian workers and businesses afloat through the pandemic recession. The government is using a firm but fair approach to recover pandemic-era public funds where repayment is expected. This provision will be adjusted as appropriate as more repayment information becomes available.

Discussion and analysis

Economic context1

The Canadian economy has proved resilient to challenging global conditions in the wake of Russia's invasion of Ukraine and in the face of rapid and substantial increases in interest rates. Canada avoided the recession expected by many forecasters with real GDP rising 1.5% in 2023 following strong growth of 4.2% in 2022. As of the end of 2023, real GDP stood 6.4% above 2019 levels, the second fastest recovery among G7 economies behind the U.S.

Job creation eased in 2023, though remained strong. An additional 475,000 Canadians gained jobs in 2023, down from an increase of 750,000 in 2022. This gain in employment was outpaced by a significant increase in the labour force due to strong population growth. Along with slowing labour demand, this has contributed to a rise in the unemployment rate from multi-decade lows. After reaching lows of about 5% in the summer of 2022, the unemployment rate increased to 5.4% on average in 2023, and more recently to 6.5% in October 2024. While hiring has slowed, this has occurred without significant layoffs. Further, wage growth has outpaced inflation for twenty straight months as of September 2024. On average, real wages—wages after accounting for inflation—are now higher than they were just prior to the pandemic, up roughly 5.0% since 2019.

Canada has also made substantial progress in bringing inflation down in 2023. Inflation declined from 5.9% at the start of the year to 3.4% by the end of 2023. Inflation has since returned to the Bank of Canada's target of 2% in August 2024 after 41 consecutive months above 2%, and stood at 1.6% as of September 2024, the lowest inflation rate since February 2021. The main drivers of the initial surge in inflation have abated. Energy price declines and easing tensions in global supply chains have helped reduce headline inflation. Higher borrowing costs have also started to cool domestic demand after a series of large interest rate increases by the Bank of Canada. Still, underlying price pressures and the inflation rate for shelter remained elevated throughout 2023.

With inflation above target in 2023, the Bank of Canada raised its policy rate three times over the course of the year, up from 4.25% at the beginning of the year to 5.0% by July 2023. This was the highest policy rate since 2001. Since then, with inflation continuing to decline and economic activity soft, the Bank of Canada became the first G7 central bank to begin normalizing policy when it cut its policy rate by 25 basis points in June 2024. The move was followed by two additional 25 basis points cuts at the July and September meetings, as well as a larger 50 basis points cut at the October meeting, bringing the policy rate to 3.75%.

After surging in 2022 following Russia's invasion of Ukraine, commodity prices eased throughout 2023, helped by the dissipation of global supply chain disruptions. Paired with the cooling in domestic price pressures and slower real GDP growth, this led to a more modest gain in nominal GDP, the broadest measure of the tax base, of 2.9% in 2023 following two years of double-digit growth.

So far in 2024, the Canadian economy has continued to perform better than expected and is on track to achieve a soft landing. Inflation has continued to decline, and business and household balance sheets remain relatively healthy despite still-elevated interest rates and the softening in the labour market.

Looking ahead, forecasters expect that inflation will remain around the 2% target, which could give the Bank of Canada room to bring interest rates down further, albeit to a level above their pre-pandemic low. Real GDP growth is expected to remain moderate in the second half of 2024 before picking up in 2025 and beyond, growing in line with the economy's capacity at around 2%.

The government regularly surveys private sector economists on their views on the economy to assess and manage risk. The survey of private sector economists has been used as the basis for economic and fiscal planning since 1994 and introduces an element of independence into the government's forecasts.

Table 1Average private sector forecasts
(in percentage)

  2022 2023 2024 2025
Real GDP growth
Budget 2023 3.4 0.3 1.5 2.3
Budget 2024 3.8 1.1 0.7 1.9
Actual 4.2 1.5
Nominal GDP growth
Budget 2023 11.0 0.9 3.6 4.3
Budget 2024 11.8 2.7 3.8 3.9
Actual 12.4 2.9
3-month Treasury bill rate
Budget 2023 2.4 4.4 3.3 2.6
Budget 2024 2.3 4.8 4.5 3.1
Actual 2.3 4.8
10-year government bond rate
Budget 2023 2.8 3.0 2.9 3.0
Budget 2024 2.8 3.3 3.3 3.2
Actual 2.8 3.3
Unemployment rate
Budget 2023 5.3 5.8 6.2 6.0
Budget 2024 5.3 5.4 6.3 6.3
Actual 5.3 5.4
Consumer price index inflation
Budget 2023 6.8 3.5 2.1 2.1
Budget 2024 6.8 3.9 2.5 2.1
Actual 6.8 3.9

The budgetary balance

The budgetary balance, or annual operating surplus/deficit, is the difference between the government's revenues and total expenses over a fiscal year. It is one of the key measures of the government's annual financial performance. The government posted an annual operating deficit of $61.9 billion in 2024, compared to a deficit of $35.3 billion in 2023.

The annual operating deficit before net actuarial losses represents the difference between the government's revenues and expenses excluding net actuarial losses. By excluding the impact of changes in the estimated value of the government's obligations and assets for public sector pensions and other employee and veteran future benefits recorded in previous fiscal years, this measure is intended to present a clearer picture of the results of government operations during the current fiscal year. The annual operating deficit before net actuarial losses stood at $54.4 billion in 2024, compared to $25.7 billion in 2023.

The following graph shows the government's budgetary balance since 1984, as well as the budgetary balance before net actuarial losses since 2009. 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 2024, the annual operating deficit was 2.1% of GDP, compared to a deficit of 1.2% of GDP a year earlier. The annual operating deficit before net actuarial losses was 1.9% of GDP, compared to a deficit of 0.9% of GDP a year earlier.

Annual operating surplus/deficit

(percentage of GDP)

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

 
Image description

Table 2Annual surplus/deficit
(percentage of GDP)

Fiscal year Annual surplus/deficit Annual surplus/deficit before net actuarial lossesLinks to footnote 1 in table 2
1984 (negative 7.7)  
1985 (negative 8.0)  
1986 (negative 6.7)  
1987 (negative 5.7)  
1988 (negative 5.1)  
1989 (negative 4.5)  
1990 (negative 4.3)  
1991 (negative 4.9)  
1992 (negative 4.6)  
1993 (negative 5.4)  
1994 (negative 5.2)  
1995 (negative 4.6)  
1996 (negative 3.6)  
1997 (negative 1.0)  
1998 0.3  
1999 0.6  
2000 1.4  
2001 1.8  
2002 0.7  
2003 0.6  
2004 0.7  
2005 0.1  
2006 0.9  
2007 0.9  
2008 0.6  
2009 (negative 0.6) 0.0
2010 (negative 3.6) (negative 3.1)
2011 (negative 2.1) (negative 1.7)
2012 (negative 1.6) (negative 1.1)
2013 (negative 1.2) (negative 0.5)
2014 (negative 0.4) 0.6
2015 0.0 0.4
2016 (negative 0.1) 0.4
2017 (negative 0.9) (negative 0.4)
2018 (negative 0.9) (negative 0.4)
2019 (negative 0.6) (negative 0.3)
2020 (negative 1.7) (negative 1.2)
2021 (negative 14.8) (negative 14.1)
2022 (negative 3.6) (negative 3.2)
2023 (negative 1.24) (negative 0.9)
2024 (negative 2.1) (negative 1.9)

Revenues were up $11.7 billion, or 2.6%, from the prior year, primarily reflecting an increase in personal income tax and Goods and Services Tax (GST) revenues, supported by strong labour markets and robust consumer spending. This increase was offset by lower corporate and non-resident income tax revenues (with total income tax revenues down $2.3 billion, or 0.7%).

Total expenses were up $38.3 billion, or 7.9%, from the prior year. Program expenses excluding net actuarial losses increased by $28.1 billion, or 6.4%, primarily reflecting an increase in transfers to individuals, especially elderly benefits, legislated growth in transfers to provinces, territories and municipalities, as well as other expenses, including provisions for presently unrecovered loans and benefits from support delivered during the COVID-19 pandemic. These increases were offset in part by lower other transfer payments.

Net actuarial losses decreased by $2.1 billion, or 22.2%, from the prior year, largely reflecting the amortization of actuarial gains arising in 2023.

Public debt charges increased by $12.3 billion, or 35.2%, from the prior year, largely reflecting an increase in the average effective interest rate on interest-bearing debt, offset in part by lower Consumer Price Index adjustments on Real Return Bonds.

Table 32024 Financial Highlights
(in millions of dollars)

  2024 2023
Consolidated Statement of Operations
Revenues 459,549 447,815
Expenses
Program expenses, excluding net actuarial losses 466,663 438,555
Public debt charges 47,273 34,955
Total expenses, excluding net actuarial losses 513,936 473,510
Annual operating deficit before net actuarial losses (negative 54,387) (negative 25,695)
Net actuarial losses (negative 7,489) (negative 9,627)
Annual operating deficit (negative 61,876) (negative 35,322)
Percentage of GDP (2.1%) (1.2%)
Consolidated Statement of Financial Position
Liabilities
Accounts payable and accrued liabilities 264,056 259,440
Interest-bearing debt 1,745,489 1,616,753
Foreign exchange accounts liabilities 44,106 44,151
Derivatives 4,131 4,689
Total liabilities 2,057,782 1,925,033
Financial assets 705,028 642,276
Net debt (negative 1,352,754) (negative 1,282,757)
Non-financial assets 116,603 109,744
Accumulated deficit (negative 1,236,151) (negative 1,173,013)
Percentage of GDP 42.1% 41.1%

Annual operating deficit before net actuarial losses

Actuarial losses and gains arise from the annual remeasurement of the government's existing obligations for public sector pensions and other employee and veteran future benefits, as well as differences between actual and expected returns on pension assets. The measurement of these obligations and expected returns on pension assets involves the extensive use of estimates and assumptions about future events and circumstances, such as discount rates, future inflation, returns on investments, general wage increases, workforce composition, retirement rates, and mortality rates. In particular, the unfunded obligations are sensitive to changes in both short- and long-term interest rates, which are used to estimate the value of expected future benefit payments in today's dollars. Unfunded benefit obligations are discounted based on the spot rates of Government of Canada bonds at fiscal year-end (March 31), which can fluctuate significantly from one year to the next, resulting in actuarial gains and losses that flow through the budgetary balance.

While these adjustments and revaluations are an important part of providing an accurate picture of the government's Consolidated Statement of Financial Position at a given time, they can also result in large swings in the budgetary balance, which may impair the usefulness and understandability of the government's consolidated financial statements and fiscal projections, including as a measurement of the short-term impact of government spending and taxation choices on the economy.

The annual operating deficit before net actuarial losses isolates the impact of adjustments and remeasurements of previously recorded public sector pensions and other employee and veteran future benefits and provides a clearer view of the government's planned and actual operating activities in an accounting period, with the aim of enhancing transparency and accountability.

Elimination of interest on Canada Student Loans

In 2023, the government decided to permanently eliminate interest on all Canada Student Loans, effective April 1, 2023. These loans were already under a temporary interest holiday for a period of two years. The change was enacted through the Fall Economic Statement Implementation Act, 2022, which received Royal Assent on December 15, 2022.

The elimination of interest by the government through this restructuring represents a significant concessionary term granted to borrowers. Under the government's accounting policy, loans that are restructured with significant concessionary terms are recognized at the time of restructuring, with an associated charge to transfer payment expense.

During the preparation of the March 31, 2024, consolidated financial statements, the restructuring date of these loans was further analyzed. Professional judgement was exercised to determine whether the concessionary component of the loans should have been recorded in the prior fiscal year, which would align with the period in which the decision was made by the government, and when the Canada Student-Loans-Act was amended. The government recorded the expense in 2024, however, if this transfer payment expense had been recorded in 2023 it would have increased the annual operating deficit in that year by $3.2 billion and reduced the annual operating deficit in 2024 by $3.3 billion.

Revenues

The government's revenues include proceeds received or receivable from exchange transactions, such as from the sales of goods and services, and from non-exchange transactions, such as tax revenues, where the amount of revenue earned is not as easily observed during the fiscal year. Due to their nature, the measurement of tax revenues is generally subject to a higher degree of measurement uncertainty. In developing the government's best estimates, the methodology for estimating tax revenues incorporates assessments/reassessments of tax returns completed after year-end as well as estimates of amounts not yet assessed/reassessed based on cash received that relates to the fiscal year ended March 31.

Federal revenues can be broken down into five main categories: income tax revenues, other taxes and duties, Employment Insurance (EI) premium revenues, pollution pricing proceeds, and other revenues.

Within the income tax category, personal income tax revenues are the largest source of federal revenues and accounted for 47.4% of total revenues in 2024 (up from 46.4% in 2023). Corporate income tax revenues are the second largest source of revenues and accounted for 17.9% of total revenues in 2024 (down from 21.0% in 2023). Non-resident income tax revenues are a comparatively smaller source of revenues, accounting for only 2.7% of total revenues in 2024 (down from 2.9% in 2023).

Other taxes and duties consist of revenues from the GST, energy taxes, customs import duties, and other excise taxes and duties. The largest component of this category—GST revenues—accounted for 11.2% of all federal revenues in 2024 (up from 10.3% in 2023). The share of the remaining components of other taxes and duties stood at 3.9% of total federal revenues (down from 4.1% in 2023).

EI premium revenues accounted for 6.4% of total federal revenues in 2024 (up from 6.0% in 2023).

Pollution pricing proceeds from the federal carbon pollution pricing framework accounted for 2.3% of total federal revenues in 2024 (up from 1.8% in 2023). All direct proceeds from the federal carbon pollution pricing system are returned to the jurisdictions where they were collected, as required under the Greenhouse Gas Pollution Pricing Act.

Other revenues are made up of three broad components: net income from enterprise Crown corporations and other government business enterprises; other program revenues from the sales of goods and services, and other miscellaneous revenues; and foreign exchange revenues and return on investments. Other revenues accounted for 8.1% of total federal revenues in 2024 (up from 7.5% in 2023).

Composition of revenues for 2024

Note: Numbers may not add to 100% due to rounding.

Composition of revenues for 2024. Refer to the text description following the image.

 
Image description

Table 4Composition of revenues

Revenues Percentage
Personal income tax 47.4%
Corporate income tax 17.9%
Non-resident income tax 2.7%
GST 11.2%
Other taxes and duties (GST excluded) 3.9%
Proceeds from the pollution pricing framework 2.3%
Employment Insurance premiums 6.4%
Other revenues 8.1%

Pricing carbon pollution

The Greenhouse Gas Pollution Pricing Act establishes the framework for the federal carbon pollution pricing system. Since 2019, it is no longer free to pollute anywhere in Canada and provincial and territorial governments have been able to design and implement their own carbon pollution pricing systems to meet the minimum national stringency standards, or federal "benchmark". The federal pollution pricing system applies in jurisdictions that have requested it or decided not to implement a system that meets the benchmark.

The federal pricing system has two parts:

One or both parts can apply in a jurisdiction.

The federal pollution pricing system is revenue neutral over time for the federal government. All the direct proceeds from the federal system are returned in the province or territory where they were collected.

The federal pollution pricing system helps make life affordable by returning money to families through the Canada Carbon Rebate (formerly known as the Climate Action Incentive payment) in provinces where the federal fuel charge applies—Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. Over 90% of fuel charge proceeds in these provinces are used to directly support families through the Canada Carbon Rebate, delivered quarterly by direct bank deposit or cheque. Eight out of ten households get more money back than they pay as a result of the federal carbon pollution pricing system, with lower-income households benefiting the most.

The remaining proceeds are returned to farmers, small- and medium-sized enterprises, and Indigenous governments through other federal mechanisms.

In Yukon and Nunavut, proceeds from the federal fuel charge are returned directly to the territorial governments to use as they see fit.

Historical federal pollution pricing proceeds and pollution pricing proceeds returned can be found in the following table.

Table 5Pollution Pricing Proceeds Returned
(in billions of dollars)

  Fiscal yearLinks to footnote 1 in table 5
  2019 2020 2021 2022 2023 2024
Revenues
Pollution pricing proceeds to be returned to Canadians
Annual 2.7 4.4 6.3 8.0 10.5
Cumulative 2.7 7.0 13.4 21.4 31.9
Expenses
Pollution pricing proceeds returned to CanadiansLinks to footnote 2 in table 5
Annual 0.7 2.6 4.7 3.8 7.0 9.9
Cumulative 0.7 3.3 8.0 11.8 18.8 28.6

The difference between cumulative pollution pricing revenues (proceeds) and expenses (proceeds returned) is expected to largely unwind over the next two years, with the majority being returned through the Canada Carbon Rebate for Small Businesses in fiscal year 2025.

For more information on pollution pricing proceeds, please consult the Greenhouse Gas Pollution Pricing Act Annual Report to Parliament

Revenues compared to 2023

Total revenues amounted to $459.5 billion in 2024, up $11.7 billion, or 2.6%, from 2023. The following table compares revenues for 2024 to 2023.

Table 6Revenues
(in millions of dollars)

  2024 2023 Change
$ %
Income tax revenues
Personal 217,696 207,872 9,824 4.7
Corporate 82,468 93,945 (negative 11,477) (negative 12.2)
Non-resident 12,541 13,187 (negative 646) (negative 4.9)
Total 312,705 315,004 (negative 2,299) (negative 0.7)
Other taxes and duties
Goods and services tax 51,416 45,962 5,454 11.9
Energy taxes 5,599 5,657 (negative 58) (negative 1.0)
Customs import duties 5,571 6,057 (negative 486) (negative 8.0)
Other excise taxes and duties 6,829 6,548 281 4.3
Total 69,415 64,224 5,191 8.1
Employment insurance premiums 29,560 26,914 2,646 9.8
Pollution pricing proceeds 10,503 8,041 2,462 30.6
Other revenues 37,366 33,632 3,734 11.1
Total revenues 459,549 447,815 11,734 2.6

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 15.7% in 2024 (unchanged from 2023).

Revenue ratio

(revenues as a percentage of GDP)

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

 
Image description

Table 7Revenue ratio
(revenues as a percentage of GDP)

Fiscal year Percentage
1999 17.6
2000 17.5
2001 17.6
2002 16.1
2003 16.0
2004 16.0
2005 16.0
2006 15.8
2007 16.0
2008 15.6
2009 14.3
2010 14.0
2011 14.4
2012 13.9
2013 13.9
2014 14.2
2015 14.0
2016 14.7
2017 14.4
2018 14.5
2019 14.9
2020 14.4
2021 14.3
2022 16.3
2023 15.7
2024 15.7

Expenses

Under the government's accrual accounting policies, expenses are recorded when they are incurred, rather than when the associated cash is paid. For certain types of expenses, this requires the use of estimation techniques and assumptions regarding future outcomes, such as the collection of loans and accounts receivable as reflected in provisions for credit risk, the cost of pension and other future benefits earned by employees during the fiscal year, and potential losses under litigation and other claims. Recorded amounts reflect the government's best estimates, based on circumstances and information available up to the point the financial statements are finalized. 

Federal expenses can be broken down into four main categories: transfer payments, which account for the majority of all federal spending, other expenses, public debt charges, and net actuarial losses.

Transfer payments are classified under five categories:

Other expenses, which represent the operating expenses of the government's 135 departments, agencies, and consolidated Crown corporations and other entities, accounted for 26.9% of total expenses in 2024 (up from 26.8% in 2023).

Public debt charges made up 9.1% of total expenses in 2024 (up from 7.2% in 2023).

Net actuarial losses made up the remaining 1.4% of total expenses in 2024 (down from 2.0% in 2023).

Composition of expenses for 2024

Note: Numbers may not add to 100% due to rounding.

Composition of expenses for 2024. Refer to the text description following the image.

 
Image description

Table 8Composition of expenses

Expenses Percentage
Major transfers to persons, including COVID-19 income support for workers 23.1%
Major transfers to other levels of government 19.2%
Pollution pricing proceeds returned 1.9%
Other transfer payments and Canada emergency wage subsidy 18.4%
Net actuarial losses 2.0%
Other expenses 26.9%
Public debt charges 9.1%

Expenses compared to 2023

Total expenses amounted to $521.4 billion in 2024, up $38.3 billion, or 7.9%, from 2023. The following table compares total expenses for 2024 to 2023.

Table 9Expenses
(in millions of dollars)

  2024 2023 Change
$ %
Transfer payments
Major transfers to persons
Elderly benefits 76,036 69,392 6,644 9.6
Employment insurance and support measures 23,130 21,836 1,294 5.9
Children's benefits 26,339 24,553 1,786 7.3
COVID-19 income support for workers (negative 4,838) (negative 3,544) (negative 1,294) 36.5
Total 120,667 112,237 8,430 7.5
Major transfers to other levels of government
Federal transfer support for health and other social programs 65,848 63,079 2,769 4.4
Fiscal arrangements and other transfers 34,325 27,705 6,620 23.9
Total 100,173 90,784 9,389 10.3
Pollution pricing proceeds returned 9,858 6,996 2,862 40.9
Canada Emergency Wage Subsidy (negative 420) (negative 257) (negative 163) 63.4
Other transfer payments 96,371 99,199 (negative 2,828) (negative 2.9)
Total transfer payments 326,649 308,959 17,690 5.7
Other expenses, excluding net actuarial losses 140,014 129,596 10,418 8.0
Total program expenses, excluding net actuarial losses 466,663 438,555 28,108 6.4
Public debt charges 47,273 34,955 12,318 35.2
Total expenses, excluding net actuarial losses 513,936 473,510 40,426 8.5
Net actuarial losses 7,489 9,627 (negative 2,138) (negative 22.2)
Total expenses 521,425 483,137 38,288 7.9

The expense ratio—expenses as a percentage of GDP—compares the total of all federal expenses to the size of the economy. This ratio is influenced by policy actions, economic developments, and changes in interest rates. The ratio stood at 17.8% in 2024 (up from 16.9% in 2023), largely reflecting legislated growth in transfers and increased investment in priority areas such as health care, and higher interest rates.

Expense ratio

(expenses as a percentage of GDP)

Expense ratio. Refer to the text description following the image.

 
Image description

Table 10Expense ratio
(expenses as a percentage of GDP)

Fiscal year Program expenses Public debt charges
1999 12.4 4.6
2000 11.8 4.3
2001 11.8 4.0
2002 11.9 3.5
2003 12.3 3.1
2004 12.4 2.9
2005 13.4 2.6
2006 12.5 2.4
2007 12.7 2.3
2008 12.8 2.1
2009 13.2 1.7
2010 15.9 1.7
2011 14.7 1.7
2012 13.8 1.6
2013 13.7 1.4
2014 13.3 1.3
2015 12.8 1.2
2016 13.7 1.1
2017 14.2 1.0
2018 14.4 1.0
2019 14.4 1.0
2020 15.1 1.1
2021 28.1 0.9
2022 18.9 1.0
2023 15.7 1.2
2024 16.2 1.6

Comparison of actual results to budget projections

Comparison to April 2024 budget plan

The $61.9-billion deficit recorded in 2024 was $21.8 billion higher than the $40.0-billion deficit projected in the April 2024 federal budget.

Table 11Comparison of 2024 outcomes to April 2024 budget plan
(in millions of dollars)

  Projection Actual Difference
Revenues 465,055 459,549 (negative 5,506)
Expenses
Program expenses, excluding net actuarial losses 450,292 466,663 16,371
Public debt charges 47,234 47,273 39
Total expenses, excluding net actuarial losses 497,526 513,936 16,410
Annual operating deficit before net actuarial losses (negative 32,471) (negative 54,387) (negative 21,916)
Net actuarial losses (negative 7,556) (negative 7,489) 67
Annual operating deficit (negative 40,027) (negative 61,876) (negative 21,849)

Comparison to March 2023 budget plan

The 2024 budgetary deficit of $61.9 billion was $21.8 billion higher than the $40.1-billion deficit projected for 2024 in the March 2023 federal budget.

Revenues were $2.8 billion, or 0.6%, higher than forecast in the March 2023 budget, driven by higher other revenues and EI premium revenues.

Total expenses, excluding net actuarial losses, were $23.4 billion, or 4.8%, higher than projected in the March 2023 budget, with program expenses $20.1 billion higher than forecast and public debt charges $3.4 billion higher than forecast.

Table 12Comparison of 2024 outcomes to March 2023 budget plan
(in millions of dollars)

  ProjectionLinks to footnote 1 in table 12 Actual Difference
Revenues
Income tax revenues 312,944 312,705 (negative 239)
Other taxes and duties 70,796 69,415 (negative 1,381)
Employment insurance premiums 28,218 29,560 1,342
Pollution pricing proceeds 10,127 10,503 376
Other revenues 34,692 37,366 2,674
Total revenues 456,777 459,549 2,772
Expenses
Program expenses
Major transfers to persons 125,742 120,667 (negative 5,075)
Major transfers to other levels of government 100,119 100,173 54
Pollution pricing proceeds returned 11,174 9,858 (negative 1,316)
Direct program expenses
Canada Emergency Wage Subsidy (negative 420) (negative 420)
Other transfer payments 85,846 96,371 10,525
Other expenses, excluding net actuarial losses 123,732 140,014 16,282
Total program expenses, excluding net actuarial losses 446,613 466,663 20,050
Public debt charges 43,881 47,273 3,392
Total expenses, excluding net actuarial losses 490,494 513,936 23,442
Annual operating deficit before net actuarial losses (negative 33,717) (negative 54,387) (negative 20,670)
Net actuarial losses (negative 6,383) (negative 7,489) (negative 1,106)
Annual operating deficit (negative 40,100) (negative 61,876) (negative 21,776)

Accumulated deficit

The accumulated deficit is the difference between the government's total liabilities and total assets. It consists of the accumulated operating deficit and accumulated remeasurement gains and losses.

Remeasurement gains and losses represent unrealized gains and losses due to changes in the fair value of derivatives and certain other financial instruments held by the government, excluding gains and losses due to changes in foreign exchange rates, which are charged directly to the budgetary balance. Fair values of derivatives reported in the government's financial statements represent estimated amounts the government would have to receive or pay, based on market factors, if the agreements were terminated on March 31. The government uses derivatives, such as swap agreements and foreign exchange forward agreements, to manage financial risks and as a general practice holds these agreements to maturity.

Net remeasurement gains and losses also include other comprehensive income or loss reported by enterprise Crown corporations and other government business enterprises. Other comprehensive income or loss consists of certain unrealized gains and losses on Crown corporations' financial instruments and actuarial gains and losses related to their pensions and other employee future benefit plans.

The government began reporting remeasurement gains and losses in 2023 with the adoption of a new suite of financial instruments standards issued by the Public Sector Accounting Board. In accordance with those standards, remeasurement gains and losses are not included in the government's annual budgetary balance and are instead recorded directly as part of the accumulated deficit.

Table 13Accumulated deficit
(in millions of dollars)

  2024 2023 Difference
Accumulated deficit at beginning of year (negative 1,173,013) (negative 1,142,538) (negative 30,475)
Annual operating deficit (negative 61,876) (negative 35,322) (negative 26,554)
Net remeasurement (losses) gains for the year (negative 1,262) 4,847 (negative 6,109)
Accumulated deficit at end of year (negative 1,236,151) (negative 1,173,013) (negative 63,138)
Accumulated deficit is comprised of:
Accumulated operating deficit (negative 1,245,494) (negative 1,183,618) (negative 61,876)
Accumulated remeasurement gains 9,343 10,605 (negative 1,262)
Total (negative 1,236,151) (negative 1,173,013) (negative 63,138)

The accumulated deficit increased by $63.1 billion in 2024, reflecting the $61.9-billion budgetary deficit and $1.3 billion in net remeasurement losses. As a percentage of GDP, the accumulated deficit increased 1.0 percentage point to 42.1% of GDP at March 31, 2024. The government is committed to reducing the accumulated deficit-to-GDP ratio over the medium term as its key fiscal anchor.

Graph - Accumulated deficit

(as a percentage of GDP)

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

 
Image description

Table 14Accumulated deficit
(as a percentage of GDP)

Fiscal year Percentage
1999 58.9
2000 53.6
2001 47.0
2002 44.7
2003 42.3
2004 39.5
2005 37.0
2006 33.9
2007 31.2
2008 29.0
2009 28.2
2010 33.4
2011 33.4
2012 33.4
2013 34.0
2014 32.9
2015 31.5
2016 31.9
2017 32.2
2018 31.4
2019 30.7
2020 31.2
2021 47.2
2022 45.0
2023 41.1
2024 42.1

Measures of government debt

There are several generally accepted measures of government debt.

Measures of Government debt chart

Measures of Govenment debt. Refer to the text description following the image.

 
Image description

The Measures of Government debt chart a total of 10 relationship boxes. The first 5 liability measurements align horizontally as follows: Unmatured debt which is made up of Market debt for $1,371.9 billion (marketable bonds, treasury bills, retail debt and foreign currency debt) and Obligations under capital leases and public-private partnerships for $4.9 billion; Pension and other liabilities for $368.7 billion; Accounts payable and accrued liabilities for $264.1 billion; and Foreign exchange accounts liabilities and derivatives for $48.2 billion. The remaining measurement relationship boxes are aligned vertically below as follows: Total liabilities for $2,057.8 billion; Less financial assets for $705.0 billion; Net debt for $1,352.8 billion; Less non-financial assets for $116.6 billion; and Accumulated deficit for $1,236.2 billion.

The following sections provide more details on each of these components.

Table 15Statement of financial position
(in millions of dollars)

  2024 2023 Difference
Liabilities
Accounts payable and accrued liabilities 264,056 259,440 4,616
Interest-bearing debt
Unmatured debt 1,376,822 1,265,040 111,782
Pensions and other future benefits 361,704 344,374 17,330
Other liabilities 6,963 7,339 (negative 376)
Total 1,745,489 1,616,753 128,736
Foreign exchange accounts liabilities 44,106 44,151 (negative 45)
Derivatives 4,131 4,689 (negative 558)
Total liabilities 2,057,782 1,925,033 132,749
Financial assets
Cash and accounts receivable 292,103 243,520 48,583
Foreign exchange accounts assets 180,140 169,390 10,750
Derivatives 2,928 3,260 (negative 332)
Loans, investments and advances 209,802 213,110 (negative 3,308)
Public sector pension assets 20,055 12,996 7,059
Total financial assets 705,028 642,276 62,752
Net debt (negative 1,352,754) (negative 1,282,757) (negative 69,997)
Non-financial assets 116,603 109,744 6,859
Accumulated deficit (negative 1,236,151) (negative 1,173,013) (negative 63,138)

Accounts payable and accrued liabilities

The government's accounts payable and accrued liabilities consist of amounts payable related to tax based on assessments and estimates of refunds owing for tax assessments not completed by year-end; provisions for contingent liabilities, including for guarantees provided by the government and claims and pending and threatened litigation; environmental liabilities and asset retirement obligations, which include estimated costs related to the remediation of contaminated sites and the future retirement of certain tangible capital assets; deferred revenue; 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 Indigenous governments for taxes collected and administered on their behalf in accordance with tax agreements; and amounts owing at year-end pursuant to contractual arrangements or for work performed or goods received.

Accounts payable and accrued liabilities by category for 2024

Note: Numbers may not add to 100% due to rounding.

Accounts payable and accrued liabilities by category for 2024. Refer to the text description following the image.

 
Image description

Table 16Accounts payable and accrued liabilities by category

Accounts payable and accrued liabilities Percentage
Other accounts payable and accrued liabilities 30.3%
Amounts payable related to tax 33.2%
Deferred revenues 6.5%
Environmental liabilities and asset retirement obligations 8.6%
Provision for contingent liabilities 21.4%

At March 31, 2024, accounts payable and accrued liabilities totalled $264.1 billion, up $4.6 billion from March 31, 2023. This increase reflects significant growth in other accounts payable and accrued liabilities and a modest increase in amounts payable related to tax, offset in part by a large decline in contingent liabilities and smaller decreases in deferred revenue and environmental liabilities and asset retirement obligations.

Accounts payable and accrued liabilities have increased significantly in recent years, from $123.4 billion at March 31, 2017, to $264.1 billion at March 31, 2024. This increase is due in large part to an increase in accounts payable pursuant to contractual agreements, for work performed, goods received, and services rendered; increased provisions for contingent liabilities, reflecting the government's efforts to accelerate the resolution of Indigenous claims to support reconciliation in Canada; and growth in amounts payable related to tax, reflecting growth in the tax base.

Graph - Accounts payable and accrued liabilities

Note 1: Other includes provisions for environmental liabilities and asset retirement obligations and deferred revenues.

(in billions of dollars)

Accounts payable and accrued liabilities. Refer to the text description following the image.

 
Image description

Table 17Accounts payable and accrued liabilities
(in billions of dollars)

Fiscal year Amounts payable related to tax Accounts payable and accrued liabilities Provision for contingent liabilities OtherLinks to footnote 1 in table 17
1999 29 41 4 3
2000 30 40 4 3
2001 33 40 4 5
2002 34 33 4 5
2003 34 35 4 6
2004 33 39 3 5
2005 36 48 2 8
2006 38 50 1 8
2007 41 52 1 8
2008 49 35 14 8
2009 51 34 13 12
2010 48 42 13 12
2011 49 40 13 13
2012 51 43 13 13
2013 55 32 12 14
2014 53 28 11 15
2015 56 28 12 20
2016 54 31 13 23
2017 55 30 17 22
2018 62 39 23 21
2019 65 44 26 21
2020 60 50 25 25
2021 72 62 45 25
2022 78 88 53 43
2023 85 58 76 41
2024 88 80 57 40

Interest-bearing debt

Interest-bearing debt includes unmatured debt, or debt issued on the credit markets, pension and other future benefit liabilities, and other liabilities.

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 2009 due to the increase in financial requirements stemming from the recession and stimulus measures introduced to mitigate its impacts, 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 CMHC, the Business Development Bank of Canada (BDC) and Farm Credit Canada (FCC) through direct lending in order to reduce overall borrowing costs and improve the liquidity of the government securities market. More recently, increased financial requirements due to the COVID-19 pandemic and Canada's Economic Response Plan contributed to a further increase in unmatured debt as a portion of interest-bearing debt.

Graph - Interest-bearing debt by category for 2024

Note: Numbers may not add to 100% due to rounding.

Interest-bearing debt by category for 2024. Refer to the text description following the image.

 
Image description

Table 18Interest-bearing debt by category

Interest bearing debt Percentage
Marketable bonds denominated in CAD 62.3%
Treasury bills 15.1%
Other unmatured debt 1.5%
Public sector pensions 9.5%
Other employee and veteran future benefits 11.2%
Other liabilities 0.4%

At March 31, 2024, interest-bearing debt totalled $1,745.5 billion, up $128.7 billion from March 31, 2023. Within interest-bearing debt, unmatured debt increased by $111.8 billion and liabilities for other employee and veteran future benefits increased by $18.4 billion, while liabilities for public sector pensions decreased by $1.1 billion and other liabilities decreased by $0.4 billion.

The $111.8-billion increase in unmatured debt is largely attributable to a $112.0-billion increase in market debt and related unamortized discounts and premiums, reflecting increased borrowings to meet the government's financial requirements.

The Bank of Canada and the Department of Finance Canada 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. The vast majority of debt is denominated in Canadian dollars. There is a small amount of borrowings denominated in US dollars, which fund a portion of the foreign exchange reserves. The reserves are managed under an asset-liability matching framework, and foreign exchange and interest rate risks are mitigated. Details on the government's debt management objectives, strategy, borrowing plans, and debt management activities are tabled annually in Parliament through the Department of Finance Canada's Debt Management Strategy and Debt Management Report.

Foreign holdings of the government's unmatured debt are estimated at $437.3 billion at March 31, 2024, representing approximately 31.8% of the government's total unmatured debt, up from 28.6% at March 31, 2023. Canada continues to benefit from the support of non-resident holders of government debt, which reflects the prudent approach to debt management and Canada's strong credit rating profile.

Foreign holdings of Government of Canada unmatured debt

(as a percentage of unmatured debt)

Source: Statistics Canada

Foreign holdings of Government of Canada unmatured debt. Refer to the text description following the image.

 
Image description

Table 19Foreign holdings of Government of Canada unmatured debt
(as a percentage of unmatured debt)

Fiscal year Percentage
1999 22.4
2000 21.6
2001 20.8
2002 18.4
2003 20.9
2004 15.1
2005 14.2
2006 14.5
2007 14.3
2008 13.9
2009 13.9
2010 16.7
2011 22.0
2012 25.9
2013 29.5
2014 27.1
2015 28.1
2016 30.6
2017 30.3
2018 30.7
2019 29.7
2020 29.4
2021 24.5
2022 28.6
2023 28.6
2024 31.8

The government's liabilities for pensions and other future benefits stood at $361.7 billion at March 31, 2024, up $17.3 billion from the prior year. These liabilities reflect the estimated present value of pensions and other future benefits earned to March 31, 2024, by current and former employees, as measured annually on an actuarial basis, net of the value of assets set aside for funding purposes. Liabilities for pensions and other future benefits do not include benefits payable under the CPP. The CPP is not consolidated in the government's financial statements because changes to the CPP require the agreement of two-thirds of participating provinces and it is therefore not controlled by the government. Further information regarding the CPP can be found in Section 6 of this volume.

Accounting for public sector pensions and other employee and veteran future benefits

The government's $361.7-billion liability for public sector pensions and other employee and veteran future benefits results from its promise to provide certain benefits to employees, veterans, Members of Parliament, and employees of territorial governments during or after employment, or in retirement, in return for their service.

For benefits that accumulate over time as employees work, such as pensions, an annual expense and liability are generally recorded for the estimated cost of benefits earned by employees during the year. The government uses an actuarial cost method (the projected benefit method prorated on service) to estimate this expense and liability. Under this method, the government estimates the total expected future benefit payments for current employees. This total is then prorated over employees' eligible period of employment. This means that an equal portion of the estimate is expensed as current service cost in each year of an employee's eligible period of service, on a present value basis, assuming no change in discount rates and assumptions. Several actuarial assumptions are used in calculating current service cost, including future inflation, interest rates, return on pension investments, general wage increases, workforce composition, retirement rates and mortality rates.

For benefits or compensated absences that do not vest or accumulate, such as veteran future benefits and workers' compensation, a liability and expense for the expected cost of providing future benefits is recognized immediately in the period when the obligating event occurs. For example, some benefits provided to employees in the event of an accident or injury are recorded when the accident or injury occurs.

Since April 1, 2000, amounts equal to contributions less benefit payments and other charges that fall within the Income Tax Act limits are transferred to the Public Sector Pension Investment Board (PSPIB) for investment in relation to the public service, Canadian Forces–Regular Force and Royal Canadian Mounted Police pension plans, and since 2007 for the Canadian Forces–Reserve Force pension plan. Pension assets held by the PSPIB are valued at a market-related value. The government's accrued benefit obligations for public sector pensions and other employee and veteran future benefits are presented net of pension assets, as well as unrecognized net actuarial gains and losses (discussed below) and amounts related to the plans of some consolidated Crown corporations and other entities, in arriving at the liability for pensions and other future benefits shown on the Consolidated Statement of Financial Position.

Since the government's obligations for pensions and other future benefits are recorded on a present value basis, interest expense is recorded each year and added to the obligations to reflect the passage of time, as these liabilities are one year closer to settlement. Interest expense is recorded net of the expected return on the market-related value of investments for funded pension benefits and reported as part of public debt charges. Current service cost is recorded as part of other expenses excluding net actuarial losses on the Consolidated Statement of Operations and Accumulated Operating Deficit.

When an employee ceases employment with the government, the government stops recording current service cost in respect of that employee. Benefits subsequently provided to the employee are recorded as reductions in the government's benefit obligations.

The government's obligations for pensions and other future benefits are re-estimated on an annual basis to reflect actual experience and updated actuarial assumptions. Increases or decreases in the estimated value of the obligations are referred to as actuarial gains and losses. Actuarial gains and losses also result from differences between actual and expected returns on pension assets. Under Canadian public sector accounting standards, actuarial gains and losses are not recognized in the government's liabilities immediately due to their tentative nature and because further adjustments may be required in the future. Instead, these amounts are recognized to expense and to the government's liabilities over the expected average remaining service life of employees, which represents periods ranging from 4 to 23 years according to the plan in question and year in which the actuarial gain or loss originated, or the average remaining life expectancy of benefit recipients under wartime veteran plans, which represents periods ranging from 5 to 7 years.

For example:

The amount of net actuarial gains and losses amortized each year varies, as some actuarial gains and losses from previous fiscal years reach the end of their amortization periods and new actuarial gains and losses begin to be amortized.

Any plan amendments, curtailments and settlements that affect accrued benefit obligations for services already rendered by employees and veterans are reflected in the government's obligations in the period of the amendment, curtailment or settlement and recorded as part of other expenses excluding net actuarial losses.

The following table illustrates the change in the government's liabilities for pensions and other future benefits, net of public sector pension assets, in 2024.

Table 20Net pensions and other future benefit liabilities
(in millions of dollars)

  Pensions Other future benefits Total
Net future benefit liabilities at beginning of year 153,429 177,949 331,378
Add:
Benefits earned during the year 9,021 12,036 21,057
Interest on accrued benefit obligations, net of the expected return on investments 2,304 6,835 9,139
Net actuarial losses recognized during the year 285 7,205 7,490
Valuation allowance (negative 332) (negative 332)
Subtotal 11,278 26,076 37,354
Deduct:
Benefits paid during the yearLinks to footnote 1 in table 20 15,819 7,548 23,367
Transfers to the PSPIB and net use of funds held in external trustsLinks to footnote 2 in table 20 3,052 3,052
Transfers to other plans and administrative expenses 537 127 664
Subtotal 19,408 7,675 27,083
Net (decrease) increase (negative 8,130) 18,401 10,271
Net future benefit liabilities at end of year 145,299 196,350 341,649
Presented on the Consolidated Statement of Financial Position as:
Public sector pension liabilities     165,354
Other employee and veteran future benefit liabilities     196,350
Total pension and other future benefit liabilities     361,704
Public sector pension assets     20,055
Net pensions and other future benefit liabilities     341,649

The increase in net liabilities for pensions and other future benefits in 2024 reflects the addition of $21.1 billion in future benefits earned by employees during the year, as well as $9.1 billion in net interest charges on the liabilities. The discount rates used in the measurement of the government-sponsored unfunded pension and other future benefit obligations and in calculating interest charges on the obligations are based on the actual zero-coupon yield curve for Government of Canada bonds at fiscal year-end. The discount rates used to value the government's obligations for funded pension benefits, which relate to post-March 2000 service that falls within the Income Tax Act limits 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 are based on the streamed expected rates of return on invested funds.

The government's liabilities for pensions and other future benefits increased by an additional $7.5 billion in 2024 due to the recognition of net actuarial losses. As of March 31, 2024, the government had net unamortized gains of $8.8 billion. These gains will be amortized over time and recorded as part of net actuarial gains and losses and as a decrease in the government's liabilities.

These increases were offset in part by reductions in the liabilities for benefits paid during the year ($23.4 billion), net transfers to the PSPIB and net use of funds held in external trusts ($3.1 billion), transfers to other plans and administrative expenses ($0.7 billion), and a valuation allowance ($0.3 billion).

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

Interest-bearing debt stood at 59.5% of GDP in 2024, up from 56.7% in 2023. The sharp increase in interest-bearing debt in 2021 shown in the chart below reflects borrowings undertaken to meet the government's financial requirements under the COVID-19 Economic Response Plan. As of 2024, this ratio is down 15.4 percentage points from its high of 74.9% in 1996.

Graph - Interest-bearing debt

(as a percentage of GDP)

Interest-bearing debt. Refer to the text description following the image.

 
Image description

Table 21Interest-bearing debt
(as a percentage of GDP)

Fiscal year Percentage
1999 67.5
2000 63.2
2001 57.0
2002 54.6
2003 51.9
2004 49.4
2005 45.9
2006 42.8
2007 40.4
2008 37.2
2009 43.2
2010 49.4
2011 49.1
2012 48.6
2013 50.1
2014 47.6
2015 45.8
2016 47.5
2017 48.4
2018 46.6
2019 45.7
2020 46.6
2021 65.2
2022 62.5
2023 56.7
2024 59.5

The average effective interest rate on the government's interest-bearing debt in 2024 was 2.8%, up from 2.2% in 2023. The average effective interest rate on unmatured debt and cross-currency swaps was 2.8%, while the average effective interest rate on pension and other liabilities was 2.9%.

Average effective interest rate on interest-bearing debt

(in percentage)

Average effective interest rate on interest-bearing debt. Refer to the text description following the image.

 
Image description

Table 22Average effective interest rate on interest-bearing debt
(in percentage)

Fiscal year Interest-bearing debt percentage Unmatured debt percentage Pension and other liabilities percentage
1999 6.8 7.0 6.2
2000 6.8 6.7 7.2
2001 6.9 6.8 7.2
2002 6.3 6.1 6.9
2003 6.0 5.7 6.8
2004 5.8 5.3 6.9
2005 5.5 5.0 6.9
2006 5.5 5.0 6.9
2007 5.6 5.1 6.8
2008 5.6 5.1 6.7
2009 4.3 4.1 5.0
2010 3.6 3.1 4.8
2011 3.6 3.1 5.0
2012 3.5 3.0 4.7
2013 2.9 2.6 3.8
2014 2.7 2.5 3.4
2015 2.7 2.4 3.5
2016 2.3 2.3 2.5
2017 2.2 2.1 2.6
2018 2.2 2.0 2.7
2019 2.3 2.2 2.5
2020 2.3 2.4 2.1
2021 1.6 1.6 1.5
2022 1.6 1.5 1.9
2023 2.2 2.1 2.5
2024 2.8 2.8 2.9

The interest ratio (public debt charges as a percentage of revenues) shows the proportion of every dollar of revenue that is needed to pay interest and is therefore not available to pay for program initiatives. The interest ratio had been decreasing in recent years, falling from a peak of 37.6% in 1991 to 5.9% in 2022. The ratio has since increased to 10.3% in 2024, reflecting growth in the stock of debt and an increase in interest rates. This means that, in 2024, the government spent approximately 10 cents of every revenue dollar on servicing the public debt, which is still relatively low by historical standards.

Interest ratio

(public debt charges as a percentage of revenues)

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

 
Image description

Table 23Interest ratio
(public debt charges as a percentage of revenues)

Fiscal year Percentage
1999 26.2
2000 24.6
2001 22.6
2002 21.6
2003 19.6
2004 17.8
2005 15.9
2006 15.1
2007 14.2
2008 13.6
2009 11.9
2010 12.0
2011 12.0
2012 11.8
2013 10.0
2014 9.2
2015 8.6
2016 7.5
2017 7.3
2018 7.0
2019 7.0
2020 7.3
2021 6.4
2022 5.9
2023 7.8
2024 10.3

Foreign exchange accounts liabilities and derivatives 

Foreign exchange accounts liabilities include Special Drawing Rights (SDR) allocations and notes payable to the International Monetary Fund (IMF). The SDR is an international reserve asset created by the IMF and allocated to countries participating in its Special Drawing Rights Department. SDRs represent both an asset (a holder of SDRs has the right to exchange them for an equivalent amount of freely usable currency, or other reserve assets, of other countries participating in the IMF's SDR Department) and a liability (an allocation of SDRs by the IMF entails an obligation to provide, on demand, an equivalent amount of freely usable currency to another IMF member). SDR holdings are recorded in foreign exchange accounts assets. The government's foreign exchange accounts liabilities at March 31, 2024, stood at $44.1 billion, down $45 million from a year earlier primarily due to foreign exchange rate movements, which resulted in the liabilities depreciating against the Canadian dollar.

Derivatives represent financial contracts whose value is derived by reference to a rate, index, or underlying asset. The government uses derivatives for hedging purposes to manage various types of financial risk. With the adoption of new accounting standards on financial instruments in 2023, derivatives are presented separately from other types of liabilities and are recorded at fair value. Derivatives estimated to require a net outflow of resources if terminated on March 31 are presented as liabilities, while derivatives estimated to result in a net inflow of resources if terminated on March 31 are presented as assets. Derivative liabilities decreased by $0.6 billion to $4.1 billion at March 31, 2024, reflecting changes in fair value, foreign exchange rates, and contracts that matured during 2024.

Financial assets

Financial assets include cash on deposit with the Bank of Canada, chartered banks and other financial institutions, accounts receivable, foreign exchange accounts assets, derivatives, loans, investments and advances, and public sector pension assets. The government's foreign exchange accounts assets include foreign currency deposits, investments in marketable securities, and subscriptions and loans to the IMF. 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 foreign exchange markets. Further details on the management of international reserves, including foreign currency and interest rate risk, are available in the annual Report on the Management of Canada's Official International Reserves. The government's derivative assets include cross-currency swaps and foreign exchange forward agreements. 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, loans under the Canada Student Loans Program, and loans to small businesses and not-for-profits under the CEBA program.

Financial assets by category for 2024

Note: Numbers may not add to 100% due to rounding.

Financial assets by category for 2024. Refer to the text description following the image.

 
Image description

Table 24Financial assets by category

Financial assets Percentage
Cash and cash equivalents 10.6%
Taxes receivable 28.8%
Other accounts receivable 2%
Foreign exchange accounts assets 25.6%
Derivatives 0.4%
Loans, investments and advances 29.8%
Public sector pension assets 2.8%

At March 31, 2024, financial assets amounted to $705.0 billion, up $62.8 billion from March 31, 2023. The increase reflects growth in cash and accounts receivable, foreign exchange accounts assets, and public sector pension assets, offset in part by a decrease in derivatives and loans, investments and advances.

At March 31, 2024, cash and accounts receivable totalled $292.1 billion, up $48.6 billion from March 31, 2023. Within this component, cash and cash equivalents increased by $26.1 billion, as the government maintained higher cash balances at March 31, 2024, in preparation for a large debt maturity on April 1, 2024. The balance of cash and cash equivalents at March 31, 2024, includes $20.0 billion that has been designated as a deposit held with respect to prudential liquidity management, as well as $8.0 billion in term deposits from the recent reintroduction of morning auctions of Receiver General cash balances. The morning auctions are conducted by the Bank of Canada in its role as fiscal agent for the Government of Canada and allow the government to invest excess cash balances in a prudent and cost-effective manner. Taxes receivable increased by $22.1 billion during 2024 to $203.0 billion, reflecting a number of factors, including growth in tax revenues, a higher prescribed interest rate, and an increase in corporations' arrears. Other accounts receivable increased by $0.5 billion largely reflecting net increases in COVID-19 benefit overpayments receivable from individuals and businesses, and year-over-year timing differences in the assessment of fuel charges, offset in part by the receipt during 2024 of dividends receivable from CMHC at March 31, 2023.

Loans, investments and advances in enterprise Crown corporations and other government business enterprises increased by $14.3 billion in 2024. Investments in enterprise Crown corporations and other government business enterprises decreased $2.0 billion, largely reflecting $1.4 billion in dividends paid to the government, and $0.7 billion in net losses and $0.2 billion in other comprehensive losses recorded by these entities during 2024, offset in part by $0.3 billion in net equity contributions to these corporations and enterprises during the year. Additionally, other investments in enterprise Crown corporations and other government business enterprises rose $7.6 billion due to the government's purchases of CMBs from CMHC, which began in 2024. Net loans and advances to enterprise Crown corporations and other government business enterprises were up $8.7 billion. This growth primarily reflects a $7.9-billion increase in loans to Crown corporations under the consolidated borrowing framework to finance the operational needs of BDC, CMHC and FCC.

Other loans, investments and advances decreased by $17.6 billion, from $62.1 billion to $44.5 billion, primarily reflecting a decrease in CEBA loans outstanding following the January 18, 2024, forgiveness repayment date (or by March 28, 2024, for those that applied for refinancing with the financial institution that provided their CEBA loan on or before January 18, 2024) and a concessionary discount on the value of Canada Student Loans recorded in 2024 to reflect the elimination of interest effective April 1, 2023. These decreases were partly offset by net issuances of Canada Student Loans, loans to national governments, and loans by Canada Infrastructure Bank.

Purchases of Canada Mortgage Bonds

Following a consultation held during the summer of 2023 on the proposal to consolidate CMBs into the regular Government of Canada borrowing program, the government announced in the 2023 Fall Economic Statement that it would purchase up to an annual maximum of $30 billion of CMBs. The government began these purchases in February 2024.

CMBs are issued by CMHC and sold to investors to generate funds for residential mortgage financing. The purchase of CMBs allows the government to generate additional net revenues to channel to initiatives such as affordable housing. CMBs are typically issued at a spread above the yields of corresponding Government of Canada securities despite bearing the full faith and credit of the Government of Canada. Consequently, the purchase of CMBs generates interest return in the form of coupon payments higher than the government's cost of funding without increasing its risk exposure.

The government' consolidated statement of financial position is impacted by the acquisition of CMBs through an increase in the stock of gross debt of the government since purchases are funded by additional debt issuance. However, there is no impact on net debt since the government holds corresponding financial assets. As of March 31, 2024, the government had purchased $7.6 billion of CMBs, which are reported as assets within the government's Loans, investments and advances on the Consolidated Statement of Financial Position. The total funding for these purchases represents 0.4% of the government's total liabilities as of March 31, 2024.

Canada Emergency Business Account

The Canada Emergency Business Account was announced by the government in March 2020 as part of Canada's COVID-19 Economic Response Plan to support businesses and not-for-profit organizations adversely affected by the pandemic. The program was available from April 2020 to June 2021 and provided eligible businesses and organizations with financial support in the form of interest-free partially forgivable loans of up to $60,000 to help cover their operating costs. In total, the program provided over $49 billion in loans to nearly 900,000 small businesses and not-for-profit organizations. For eligible CEBA loan holders in good standing, repaying the balance of the loan on or before January 18, 2024, resulted in loan forgiveness of up to 33% (up to $20,000) and businesses that sought refinancing in order to repay their loans had until March 28, 2024, to qualify for partial loan forgiveness. As of March 31, 2024, approximately $28 billion of loans had been repaid, resulting in $12 billion in loan forgiveness. The cost of this forgiveness was expensed as the loans were disbursed in fiscal years 2021 and 2022.

Eligible CEBA loans that remain outstanding are now converted to term loans bearing interest of 5%, with full principal repayment due on December 31, 2026. This three-year, low-interest term loan will provide eligible borrowers with additional time to continue repayment at a low borrowing cost. The government's approach to collecting funds is focused on helping borrowers resolve their debts, while applying laws and regulations in a uniform and fair way.

Public sector pension assets increased by $7.1 billion, largely reflecting increases in the net assets under the Public Service Pension Fund and Canadian Forces Pension Fund, which pertain to service accrued on or after April 1, 2000, that falls within the Income Tax Act limits under the Public Service Superannuation Act and the Canadian Forces Superannuation Act, respectively.

Foreign exchange accounts assets increased by $10.8 billion in 2024, totalling $180.1 billion at March 31, 2024, due mainly to net advances to the Exchange Fund Account.

Derivative assets decreased $0.3 billion to $2.9 billion at March 31, 2024.

Since the accumulated deficit reached its post-World War II peak of 66.6% of GDP at March 31, 1996, financial assets have increased by $603.9 billion, mainly reflecting higher levels of cash and cash equivalents and accounts receivable (up $239.5 billion), an increase in foreign exchange accounts assets (up $152.7 billion), and an increase in loans, investments and advances (up $188.8 billion). The increase in cash and cash equivalents and accounts receivable is largely attributable to growth in taxes receivable and cash balances. The increase in taxes receivable reflects growth in the applicable tax bases, while the growth in cash reflects an increase in balances held under the government's prudential liquidity management plan announced in Budget 2011. The increase in the foreign exchange accounts reflects a decision by the government in the late 1990s and more recently in the 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, the issuance of direct loans to Crown corporations under the government's consolidated borrowing framework implemented in 2008, and most recently, purchases of CMBs from the Canada Mortgage and Housing Corporation to lower the government's overall borrowing costs.

Graph - Financial assets

(in billions of dollars)

Financial assets. Refer to the text description following the image.

 
Image description

Table 25Financial assets
(in billions of dollars)

Fiscal year Cash and accounts receivable Foreign exchange accounts assets and derivatives Loans, investments and advances and public sector pension assets Total
1999 56 45 19 120
2000 62 52 20 134
2001 67 61 25 153
2002 60 62 26 148
2003 63 58 28 149
2004 71 55 34 160
2005 76 52 38 167
2006 83 54 42 179
2007 93 58 45 196
2008 83 57 51 191
2009 122 64 125 311
2010 101 68 153 322
2011 96 70 159 325
2012 107 78 153 337
2013 123 78 155 356
2014 128 91 119 337
2015 137 106 115 357
2016 155 124 118 396
2017 157 129 126 413
2018 172 128 128 428
2019 177 129 136 443
2020 174 134 157 465
2021 224 120 186 530
2022 280 151 216 648
2023 244 173 223 639
2024 292 183 230 705

Net debt

The government's net debt—its total liabilities less financial assets—stood at $1,352.8 billion at March 31, 2024. Net debt was 46.1% of GDP, up 1.1 percentage points from a year earlier, and 25.9 percentage points below its peak of 72.0% at March 31, 1996. The increase in net debt as a percentage of GDP since 2020 reflects borrowings undertaken to meet the government's financial requirements under the COVID-19 Economic Response Plan.

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

(as a percentage of GDP)

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

 
Image description

Table 26Net debt
(as a percentage of GDP)

Fiscal year Percentage
1999 64.1
2000 58.5
2001 51.7
2002 49.4
2003 46.9
2004 43.9
2005 41.1
2006 37.8
2007 35.0
2008 32.7
2009 32.0
2010 37.4
2011 37.4
2012 37.2
2013 37.7
2014 36.6
2015 35.1
2016 35.6
2017 36.0
2018 35.2
2019 34.5
2020 35.1
2021 51.8
2022 49.1
2023 45.0
2024 46.1

International comparisons of net debt

Jurisdictional responsibility (between central, state, and local levels of government) for government programs differs among countries. As a result, international comparisons of government fiscal positions are undertaken on a total government, National Accounts basis. For Canada, total government net debt includes that of the federal, provincial/territorial, and local governments, as well as the net assets held in the Canada Pension Plan and Quebec Pension Plan.

Canada has the lowest total government net debt burden among G7 countries

G7 total government net debt, 2023

(as a percentage of GDP)

Source: IMF October 2024 Fiscal Monitor

G7 total Government net debt, 2023. Refer to the text description following the image.

 
Image description

Table 27G7 total government net debt, 2023
(as a percentage of GDP)

Country Percentage
Canada 13.1
Germany 45.1
United Kingdom 91.5
United States 95.7
France 101.7
Italy 124.1
Japan 154.1
G7 average 93.8

Canada's total government net debt-to-GDP ratio stood at 13.1% in 2023, according to the IMF. This is the lowest level among G7 countries, which the IMF estimates will record an average net debt of 93.8% of GDP in that same year.

International organizations such as the IMF and the Organisation for Economic Co-operation and Development publish figures for both gross debt (equivalent to total financial liabilities) and net debt (total financial liabilities less financial assets). When assessing the overall government fiscal situation, net debt is the preferred measure as it better reflects a country's financial position by accounting for both what it owes and what it has set aside. In particular, the net debt measure recognizes that public investments in financial assets generate future revenues or have been specifically accumulated to offset current or future liabilities. This is particularly relevant in Canada's case given its sizable financial asset holdings. In particular, Canada has taken significant steps to fund its public pensions, mitigating future fiscal risks. The CPP alone had over $630 billion in net assets as of March 31, 2024, ensuring the plan is actuarially sound for Canadians for at least the next 75 years. These and other financial assets should be taken into account when assessing the country's financial situation—especially when making comparisons to peer countries that have not accumulated as many financial assets, including those to meet future public pension liabilities.

The following table provides a reconciliation between the Government of Canada's accumulated deficit-to-GDP ratio and Canada's total government net debt-to-GDP ratio used for international net debt comparison purposes. Importantly, the latter includes the net debt of the federal, provincial, territorial, and local governments, as well as the net assets held by the CPP and QPP and excludes liabilities for public sector pensions and other employee future benefits. Given significant inconsistencies across countries in the accounting treatment of unfunded liabilities for public sector pensions and other employee future benefits, international organizations remove them from debt estimates for countries that proactively include them (such as Canada) to facilitate international comparability.

Table 28Reconciliation of 2024 accumulated deficit-to-GDP ratio to calendar 2023 total government net debt-to-GDP ratio
(as a percentage of GDP)

  (% of GDP)
Accumulated deficit 42.1
Add: Non-financial assets 4.0
Net debt (Public Accounts basis) 46.1
Less:
Liabilities for public sector pensions (negative 5.6)
Liabilities for other future benefits (negative 6.7)
National Accounts/Public Accounts methodological differences and timing adjustmentsLinks to footnote 1 in table 28 (negative 8.0)
Total federal net debt (National Accounts basis) 25.7
Add: Net debt of provincial/territorial and local governments 11.6
Less: Net assets of the CPP/QPP (negative 24.4)
Total government net debtLinks to footnote 2 in table 28 12.9

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 by category for 2024

Note: Numbers may not add to 100% due to rounding.

Non-financial assets by category for 2024. Refer to the text description following the image.

 
Image description

Table 29Non-financial assets by category

Non-financial assets Percentage
Prepaid expenses and other 3.3%
Inventories 7%
Land 2%
Buildings 16.9%
Works and infrastructure 11%
Machinery and equipment 11.7%
Vehicles 15.9%
Assets under construction 28.6%
Other capital assets 3.5%

At March 31, 2024, non-financial assets stood at $116.6 billion, up $6.9 billion from a year earlier. This growth primarily relates to a $7.2-billion increase in tangible capital assets, in large part reflecting an increase in assets under construction. Prepaid expenses and other increased $0.8 billion, largely due to defence and vaccine prepayments, while inventories decreased $1.2 billion, primarily due to the revaluation of inventories.

At March 31, 2024, 61.1% of the original cost of the government's depreciable tangible capital assets had been amortized, an increase of 0.3% from a year earlier. Depreciable tangible capital assets exclude land and assets under construction, which are not yet available for use.

Tangible capital assets

Note: The amounts for 2022 were restated in 2023 to reflect the government’s adoption of the new Public Sector Accounting Standard PS 3280 Asset Retirement Obligations. Prior years’ amounts have not been restated.

(in billions of dollars)

Tangible capital asset cost and accumulated amortization. Refer to the text description following the image.

 
Image description

Table 30Tangible capital assets
(in billions of dollars)

Fiscal year Cost Net Book Value
2009 110.1 53.3
2010 115.7 55.1
2011 122.1 57.7
2012 126.1 59.0
2013 131.3 60.2
2014 135.0 61.9
2015 139.4 63.3
2016 144.6 65.8
2017 152.4 69.9
2018 157.7 73.8
2019 165.9 78.9
2020 173.7 83.7
2021 182.0 87.6
2022 189.9 91.9
2023 200.9 97.3
2024 212.6 104.6

Assets under construction totalled $33.4 billion at March 31, 2024, some of which are being built using public-private partnerships in which the private sector partner designs, builds, finances, and/or operates and maintains large infrastructure projects. The government's liability for these long-term financing arrangements is included in obligations under public-private partnerships reported in Note 11 of the consolidated financial statements.

The government has a robust policy framework for the management of assets and acquired services. The framework sets the direction for management of assets to ensure the conduct of activities provides value for money and demonstrates sound stewardship in program delivery.

Cash flow

The annual operating 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 2024, the government had a total cash requirement of $70.9 billion before financing activities, compared to a total cash requirement of $54.2 billion before financing activities in 2023. Operating activities resulted in a net cash requirement of $47.0 billion in 2024, compared to a net cash requirement of $24.4 billion in 2023, reflecting a number of factors including payments made under claims settlements during the year, the largest being the $23.3-billion payment under the final settlement agreement for First Nations Child and Family Services. Cash used by capital investment activities resulted in a net cash requirement of $13.5 billion in 2024, compared to a net cash requirement of $10.9 billion in 2023. Investing activities resulted in a net cash outflow of $10.5 billion in 2024, compared to a net cash outflow of $18.9 billion in 2023, reflecting in part the repayment of CEBA loans during 2024.

Table 31Cash flow
(in millions of dollars)

  2024 2023
RestatedLinks to footnote 1 in table 31
Cash used by operating activities (negative 46,950) (negative 24,353)
Cash used by capital investment activities (negative 13,498) (negative 10,865)
Cash used by investing activities (negative 10,478) (negative 18,940)
Total cash used before financing activities (negative 70,926) (negative 54,158)
Cash provided by financing activities 96,979 2,342
Net (decrease) increase in cash and cash equivalents 26,053 (negative 51,816)
Cash and cash equivalents at beginning of year 49,006 100,822
Cash and cash equivalents at end of year 75,059 49,006

Financing activities generated a $97.0-billion source of cash in 2024, resulting in an overall net increase in cash of $26.1 billion. The level of cash and cash equivalents stood at $75.1 billion at March 31, 2024.

Contractual obligations and contractual rights

The nature of the government's operations results in large multi-year contracts and agreements that will become expenses, liabilities, and cash outflows in future years. Major contractual obligations of the government relate to transfer payments, capital assets and purchases, operating leases, and payments to international organizations. As of March 31, 2024, future payments under contractual obligations totalled $257.1 billion ($236.5 billion as of March 31, 2023). The increase over the prior year largely reflects increased contractual obligations related to capital assets and purchases.

Similarly, the activities of government can also involve the negotiation of contracts or agreements with third parties that result in the government having rights to both assets and revenues in the future. These arrangements typically relate to sales of goods and services, leases of property, and royalties and profit-sharing arrangements. The terms of these contracts and agreements may not always allow for a reasonable estimate of revenues in the future. For contracts and agreements that do allow for a reasonable estimate, total revenues to be received in the future under major contractual rights are estimated at $35.6 billion at March 31, 2024 ($30.9 billion as of March 31, 2023).

Further details regarding the government's contractual obligations and contractual rights are provided in Section 11, Contractual obligations, contractual rights and contingent liabilities, of this volume.

Risks and uncertainties

The government's financial results are subject to risks and uncertainties inherent in the nature of certain financial statement elements and government operations, including:

The government's financial statements incorporate a number of significant estimates and assumptions related to risks and uncertainties that are used in valuing its assets, liabilities, revenues, and expenses. One of the most significant areas of measurement uncertainty relates to public sector pensions and other employee and veteran future benefits, for which payments are made many years into the future and are dependent upon the evolution of factors such as wage increases, inflation, workforce composition, retirement rates, mortality rates, and returns on pension investments. In developing its best estimates and assumptions, which are set at the reporting date, the government takes into consideration historical experience, current facts and circumstances, and expected future developments. The government's financial results are also subject to volatility as a result of year-over-year changes in the discount rates used to value its public sector pension and other employee and veteran future benefit obligations. These discount rates are affected by interest rates and expected rates of return on assets, and changes in these discount rates will result in unrealized gains and losses that are amortized to expenses.

Another significant area of measurement uncertainty relates to contingent liabilities. Contingent liabilities represent possible obligations that may result in future payments when one or more events occur or fail to occur. Examples of contingent liabilities include loan guarantees; insurance programs, including the Deposit Insurance Fund operated by the Canada Deposit Insurance Corporation and the Mortgage Insurance Fund operated by CMHC; callable share capital in international financial institutions; and claims and pending and threatened litigation. This last category includes, among other items, specific claims that deal with the past grievances of First Nations related to Canada's obligations under historic treaties or the way it managed First Nations' funds or other assets, and comprehensive land claims, which relate to areas of the country where Aboriginal rights and title have not been resolved by treaty or by other legal means. As of March 31, 2024, the government's exposure to contingent liabilities totalled over $2 trillion. However, the vast majority of this amount represents situations where the probability of a future payment is assessed as unlikely or not determinable. The government records a provision for contingent liabilities only in cases where the probability of future payment is considered likely and the amount is estimable. As of March 31, 2024, this provision totalled $56.6 billion. However, as highlighted, there is inherent uncertainty in this amount.

The government's assumptions related to risks and uncertainties used in determining its financial results are reassessed at each fiscal year-end and updated as necessary. Exposure to measurement uncertainty from the use of accounting and other estimates in recording certain transactions is discussed in the notes to the consolidated financial statements, including Note 1 (Summary of significant accounting policies). Details with respect to the measurement of specific financial statement elements, such as tax revenues (Note 4), provisions for accounts receivable (Note 16 and Note 17), contingent liabilities (Note 9), environmental liabilities and asset retirement obligations (Note 10), public sector pensions and other employee and veteran future benefits (Note 12), and loans, investments and advances (Note 19 and Note 20) are also included in the consolidated financial statements. Note 22 of the consolidated financial statements provides information on instruments and strategies used by the government to manage financial risks associated with its financial assets and liabilities.

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 Canada 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 16, 2024, federal budget, these show, for example, that:

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. 

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