Canadian government spending is growing faster than revenue while interest payments are continuing to climb, as Finance Minister Chrystia Freeland prepares to deliver her budget next month.

Program expenses excluding actuarial losses from April 2023 to January were 6.7 per cent higher than the same period during the previous year, “reflecting increases across all major categories of spending,” according to data released Friday by the Department of Finance.

Interest payments have totaled $39.2 billion (US$28.8 billion) over that period, up 36 per cent compared to the previous year, while revenues were up 3 per cent. The deficit for the 2023-2024 fiscal year is $25.7 billion so far.

Total tax revenues are up 1.1 per cent fiscal year-to-date, driven by personal income tax and other excise taxes. Corporate tax revenues are down 14.7 per cent, reflecting a slowing in economic growth.

Expenditures were driven by rising elderly benefits, as well as a 9.3 per cent increase to the Canada Health Transfer — the government announced in February last year it would increase the money it would send to provinces. The government’s operating expenses are also up 3.6 per cent.

In Canada, the government’s fiscal year begins on April 1, so Friday’s numbers represent 10 months of results. In recent years, Canada’s government expenditures have tended to jump in March, adding uncertainty to where the fiscal shortfall will ultimately end up.

It’s the last glimpse of the fiscal position before Freeland delivers her budget on April 16. Freeland has pledged fiscal restraint, saying she plans to keep deficits contained to around $40 billion from the current fiscal year until 2026.

It will take some “creative accounting” to keep the deficit within that range this fiscal year, Randall Bartlett, senior director of Canadian economics at Desjardins Securities, said in an interview. 

“Today’s numbers don’t give any indication of how they’re going to manage to do that. It’s still an open question how the finance minister is going to get there,” he said. 

The government may encourage departments to lapse spending, or forgo expenditures at the end of the year and push them off to upcoming fiscal years, Bartlett said.

“They might get lucky and pull a little bit of sleight of hand this year to meet their fiscal anchor, but it’s just going to be more challenging to do the same in future fiscal years.”