Canada's national deficit, which topped $30 billion when the Liberal Party took power in 1994, will be a mere $6.5 billion this year, according to federal Finance Minister Paul Martin, and the nation could even post a surplus of $5 billion in the view of some private-sector analysts.
"The tax burden in Canada must be reduced. It will be reduced," Martin said as he announced the preliminary figures on Canada's fiscal health Wednesday. However, he warned Canadians not to expect "any instant windfall."
To "implement a major tax reduction now would run the risk, at the first sign of an economic downturn, of plunging us back into deficit -- or else forcing crippling cuts to essential programs. This would make no sense," he added.
However, he continued, the "old days" of big spending are gone. "This government has cut up its credit card," Martin said.
Despite dampening hopes of a tax cut, Martin was praised by business leaders for lowering the deficit by $14 billion over the past year and meeting his deficit reduction targets two years ahead of schedule.
"At the risk of sounding like I'm sucking up, I'd have to give him an 'A'," said John McCallum, chief economist at the Royal Bank of Canada. "It's even possible Canada could rack up a $5 billion (U.S.) surplus in the current fiscal year."
With Canada's economy roaring ahead and providing increased revenues, federal spending cuts and lower interest rates, have all contributed to the lowest deficit in 20 years, Martin said, adding that the ratio of Canada's debt to its gross domestic product also has tumbled from 6 percent three years ago to just 1.1 percent.
In its information sheet, the Ministry of Finance noted government spending on programs fell by $5.2 billion last year to $76 billion, interest on the national debt fell by $1.3 billion to $33 billion, and revenues jumped by $7.7 billion to $103 billion. The federal debt also climbed slightly, to $426 billion from $419 billion the previous March 31.
Private sector forecasters like McCallum predict Canada's economy will grow by 3.7 percent in 1997 and 3.7 percent again in 1998, not counting inflation. Canada's stubbornly high unemployment rate, now at 9.3 percent, will post a modest decline to 8.8 percent next year, McCallum predicted.