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Federal deficit shrinks in August
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The Canadian Press-
The federal government's fiscal picture is continuing to brighten, with Ottawa reporting Friday that its deficit for August was more than $2 billion smaller than last year.
The Finance Department's latest report on revenues and expenditures shows a shortfall of $3.6 billion in August, an improvement from the $5.8 billion deficit in August 2010.
The department routinely cautions about timing issues in the monthly accounts that can create a misleading picture of the underlying situation, but the August number is in line with a general downward trend in the deficit.
For the first five months of the fiscal year that began in April, Ottawa's deficit is almost three billion dollars to the good — $10.7 billion compared with $13.5 billion in the same period last year.
The latest numbers are in line with the government bettering its projected $32.3-billion deficit for the entire 2011-12 year, but analysts say the longer term picture is less clear.
In a report earlier this week, the TD Bank estimated this year's deficit would come in $1.4 billion below expectations, but that Ottawa would be unable to meet its four-year target for getting back to balance.
TD predicts 2 years longer to balance budget
With slower growth in the forecast, TD economists estimated it would take Ottawa an extra two years to completely eliminate the red ink unless the economy improves more than expected or the government takes further action, such as new cost-cutting measures or higher taxes.
Finance Minister Jim Flaherty also would not commit to the four-year target but insisted Ottawa remained on track to eliminate the deficit "in the medium term."
In August, Ottawa said revenues increased by about $700 million, more than half coming from corporate taxes.
Program expenditures were down $1.3 billion from the previous year, with payouts for unemployment insurance dropping by about $300 million, or 15.5 per cent. Interest charges to service the national debt were almost $200 million lower.
For the first five months of the fiscal year cumulative, Ottawa has taken in $3.1 billion more in revenues, most from individuals, and spent about $300 million less than it did for the same period last year.
Public debt charges are $636 million less, the government said, "reflecting consumer price index adjustments on real return bonds and a higher stock of interest-bearing debt."
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