Ottawa expected to miss its target

Flaherty had predicted $24.9-billion shortfall

OTTAWA— Federal officials have tidied up Ottawa’s books from last year and the final tally is expected to show the Conservative government has missed its deficit-reduction target. The results for 2011-12 are expected to be somewhat worse than the $24.9-billion deficit predicted by Finance Minister Jim Flaherty.

Sources say Flaherty will disclose the figures as early as Friday in the Annual Financial Report, which covers the fiscal year that ended March 31.

Flaherty has acknowledged Ottawa’s spending commitments have had an impact on the deficit.

“You’ll see what the deficit number is, it’s within the range that we anticipated,” he told reporters earlier this week. “But there are pressures that we have on the spending side and so on, some of which we had to deal with.

“So we’re OK . . . we’re on track. But we have to be very careful, we have to monitor carefully what’s go- ing on,” Flaherty added. “We want to get back to balanced budgets, so we’re being very cautious on the spending side (so) that we maintain control (and) stay on the track that we established in the budget this year.” The March 29 budget set out a financial plan to gradually reduce the annual budget shortfall, which peaked with a $55.6-billion deficit three years ago, by 2015. It calls for cuts in federal spending of $5 billion annually. But Prime Minister Stephen Harper has said the government might be forced to increase its spending to maintain Canadian growth if the economy is hurt by a worsening of the European banking crisis or a reversal of the United States’ fragile economic recovery. The Annual Financial Report is usually released in the fall, which gives Ottawa’s number crunchers about six months to reconcile all expenses from the previous fiscal year against total federal revenues for the 12 months ending on March 31. The preliminary result for the 2011-12 fiscal year showed a $23.5 billion budget deficit, according to the federal government’s Fiscal Monitor for last March. However, that report contained the usual caution that the final deficit number for 2011-12 would not be available until the fall.

The final results must be adjusted to take account of Canadians’ tax returns and adjustments in the value of government assets and financial liabilities, the Fiscal Monitor noted.

Even if last year’s budget deficit is higher than the $24.9-billion shortfall forecast by Flaherty, it is expected to be significantly below the $33.4- billion deficit run up in 201011.