Federal officials reveal $2.2B deficit for fiscal year

A $3.6-billion deficit in March sent the federal government $2.2 billion into the red for the 2008-09 fiscal year, officials said Friday.

The latest reading on the status of the government's coffers comes just days after Finance Minister Jim Flaherty said the deficit for the current 2009-10 fiscal year is projected to hit more than $50 billion.

For the 2007-08 fiscal year, the government ran a surplus of $11.4 billion.

In its monthly fiscal monitor released Friday, the Finance Department said the government slipped into the hole in March as its budgetary revenues fell $3.1 billion, or 14.4 per cent, from March 2008, due to declines in tax revenues.

For the full 2008-09 fiscal year, the government's revenues decreased by $9.2 billion, or 3.8 per cent, mainly due to lower corporate income tax and goods and services tax revenues.

Corporate income tax revenue was down $11.1 billion, or 27.2 per cent, year-over-year due to lower business profits and the impact of tax reductions. GST revenues dropped by $4.4 billion, or 15 per cent, reflecting the one-percentage-point reduction in the GST on Jan. 1, 2008.

Government program expenses grew by $6.8 billion, or 3.5 per cent, due to higher transfer payments. That included a $2 billion increase in employment insurance benefits as more people lost their jobs due to the recession.

Public debt charges were down $2.3 billion from last year, due to lower interest rates.

After delivering the news that the government's deficit projection for the current fiscal year will go from $33.7 billion to more than $50 billion, Flaherty will provide an update to the House of Commons about the government's finances in June.