OTTAWA (Reuters) - Canada recorded a C$5.54 billion ($4.06 billion) budget deficit for the first nine months of the 2022/23 fiscal year, partly due to a rise in debt charges linked to higher inflation and interest rates, the finance ministry said on Friday.
By comparison, Canada posted a C$70.11 billion deficit in the period from April to December 2021.
Year-to-date revenues were up 11.4% on a broad-based improvement in income streams. Program expenses were down 12.3%, largely reflecting lower transfers to individuals and businesses as COVID-19 supports were wound down, the finance ministry said.
Public debt charges increased 38.4% this fiscal year, primarily reflecting higher interest rates and higher inflation adjustments on real return bonds, which have a coupon that is linked to the level of the consumer price index.
The Bank of Canada has raised rates at a record pace over the past year to tame high inflation that peaked at a four-decade high in June.
The central bank's key interest rate currently stands at a 15-year high of 4.5% after a 25 basis point hike in January, when the bank said it would likely hold off on further moves to let the effects of the previous rate increases sink in.
On a monthly basis, Canada posted a deficit of C$1.98 billion in December, compared to the C$3.58 billion surplus recorded a year ago.
($1 = 1.3642 Canadian dollars)