Canada Posts Budget Surplus

OTTAWA—Canada recorded a budget surplus of 5.01 billion Canadian dollars (US$3.79 billion) in the first three months of the current fiscal year, leading Prime Minister Stephen Harper, who is seeking a fourth straight mandate from Canadian voters, to say his economic plan is working.

The April-to-June surplus was much higher than the C$424 million surplus recorded in the same period in 2014, and "consistent" with the government's projections for a small surplus this fiscal year, the country's finance department said Friday. The surplus in the latest period was boosted by Canada's sale of shares in General Motors Co., which it had acquired as part of the U.S.-Canada financial rescue of the auto sector in 2009.

The issue of fiscal discipline has emerged as a major theme in a national election campaign in Canada. Mr. Harper has made the return to a budget surplus a centerpiece of his Conservative Party's economic platform leading to the Oct. 19 vote. Canada built up a large deficit to finance the country's recession-fighting stimulus plan in 2009. The left-leaning New Democratic Party has also vowed to run balanced budgets, while the Liberal Party says it would boost infrastructure spending to stoke growth, which it says would mean annual deficits of up to C$10 billion for the next two fiscal years before a return to balance in 2019.

"While the global economy remains volatile, our Conservative government will continue to deliver a low-tax, balanced budget plan to keep our economy moving forward," Mr. Harper said in a statement Friday.

The results for the first quarter of fiscal 2015-16 "are consistent with the fiscal projection" presented in the government's budget plan, which envisages a C$1.4 billion surplus this fiscal year, the finance department said in its monthly Fiscal Monitor report.

Doubts about the likelihood of a surplus have emerged amid slower-than-anticipated growth and the drop in the price of crude oil, Canada's top export. Canada's budget watchdog said in a report last month the Conservative government's promise of a balanced budget could be delayed by a year because of weakening economic conditions.

Canada's budget surplus in June was C$1.01 billion, down from C$1.57 billion in June 2014, according to the Fiscal Monitor.

Revenue rose 2.6% in June but expenses climbed 8.2% due to costs associated with a new national benefits program for households with children. That cost increase was offset in June by a 20.3% decline in public-debt charges, which the department said reflected lower inflation adjustments on real-return bonds and lower rates on its stock of interest-bearing debt.

Write to Paul Vieira at [e-mail]

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August 28, 2015 14:45 ET (18:45 GMT)

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