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Government finance statistics, second quarter 2022

Released: 2022-09-22

Tax revenues continue to rise, bringing the deficit back to its pre-pandemic level

The Canadian general government deficit stood at $1.5 billion in the second quarter, a sharp drop from $19.1 billion in the first quarter. This was the lowest deficit level since the third quarter of 2019 ($0.3 billion). Tax revenues were up $13.8 billion (+8.0%) in the second quarter of 2022, compared with the second quarter of 2021, driven by steady increases in taxes on income (+8.4%) and taxes on goods and services (+10.8%).

The net operating balance is the difference between revenues and expenses for a given period and is a summary measure of the sustainability of government operations. When revenues are lower than expenses, a deficit is recorded, while the reverse induces a surplus.

As a percentage of nominal gross domestic product (GDP), the deficit in the second quarter was 0.2%, down from 3.0% in the first quarter. The decline in the deficit observed in the last few quarters, which followed a peak in the spring of 2020 (when the deficit represented 21.6% of GDP), was mainly attributable to a sharp increase in nominal GDP and the end of most COVID-19-related transfer programs.

Chart 1  Chart 1: Canadian general government deficit as a percentage of gross domestic product
Canadian general government deficit as a percentage of gross domestic product

Net debt as a percentage of gross domestic product is at its lowest level in over 30 years

Net debt of the Canadian general government totalled $737.6 billion in the second quarter, down $200.4 billion from the second quarter of 2021. This decline is firstly explained by a decrease in government liabilities (-1.9%), caused by a drop in the market value of outstanding debt securities. This fluctuation is primarily due to interest rates increasing quickly. Meanwhile, the value of financial assets held by governments rose 5.6% from the second quarter of 2021.

As a result, in the second quarter of 2022, the relative weight of net debt to GDP of the Canadian general government was 27.9%, down from the pre-pandemic level of 32.8% observed at the end of the fourth quarter of 2019. The ratio in the second quarter of 2022 is the lowest level seen in 30 years.

Excluding social security funds (Canada Pension Plan and Quebec Pension Plan), whose financial assets are intended for the payment of future public retirement plan benefits, the net debt-to-GDP reached 51.3% in the second quarter of 2022.

Chart 2  Chart 2: Net debt as a percentage of gross domestic product by government subsector
Net debt as a percentage of gross domestic product by government subsector

Higher interest expenses offset by growth in revenue

Compared with the same quarter a year earlier, the interest accrued on the debt ($20.7 billion) of the Canadian general government rose sharply in the second quarter of 2022 (+21.5%). This was the largest increase in 30 years. The ratio of interest expense to revenue was 7.7% in the second quarter of 2022, up almost 1 percentage point from 6.8% in the second quarter of 2021.

The rapid increase in interest expenses in the second quarter of 2022—a direct consequence of the recent rise in interest rates and outstanding debt securities—resulted in an additional expense of $3.7 billion from the second quarter of 2021. However, over the same period, government revenue, which is sensitive to economic growth and inflation, jumped $17.9 billion (+7.1%). As a result, the short-term impact of the rapid rise in interest rates on the fiscal balance was neutralized by the additional revenue generated by the increase in nominal GDP (+14.2%).

Chart 3  Chart 3: Inflation and 10-year federal bonds yield
Inflation and 10-year federal bonds yield

  Note to readers

Quarterly financial data for the Canadian general government and its subsectors from the first quarter of 1990 to the second quarter of 2022 are now available. These subsectors include the federal government, provincial and territorial governments, local governments and the Canada and Quebec Pension Plans.

Government Finance Statistics (GFS) presents fiscal statistics using the standard developed by the International Monetary Fund. This standard allows consistent aggregation and analysis between participating countries.

Currently, GFS quarterly data are derived by mapping Canada's System of National Accounts data to GFS standards and conventions.

This release of GFS includes revised data for the first quarter of 2022.


Additional information can be found in the Latest Developments in the Canadian Economic Accounts (Catalogue number13-605-X). The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication has been updated with Chapter 9. Government Finance Statistics.

Contact information

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