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February surplus puts Ottawa on track to quicker-than-expected budget balance

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OTTAWA - The federal government posted another massive monthly budget surplus in February — the largest since the recession and one of the biggest ever — putting it on the road to easily beat its target deficit for the year.

The Finance Department said Friday it took in $5.1 billion more than it spent in February, the third large monthly surplus in a row.

For the first 11 months of the fiscal year, the government's treasury remains in a hole, but the shortfall has shrunk to $5.4 billion — about half the $10.7-billion deficit it faced at this point last year.

Analysts caution that Ottawa's monthly accounts can be lumpy — so the final month of the fiscal year ended March 31 may flip the numbers around — but, as of now, Ottawa seems to be on pace to improve on the $16.6-billion deficit anticipated in the March budget.

Bank of Montreal chief economist Doug Porter said December, January and February are usually the strongest months in terms of the government's fiscal accounts, but that's offset by tax refunds in March and April.

Ottawa posted a large $3.2-billion surplus in February 2013 as well, but that was followed by a $6.5-billion shortfall in the following month.

"I think this is further confirmation that the tide is turning on the deficit front provided the economy stays on the rails," Porter said.

"Sometimes there are special one-time write-offs and additions, but the underlying picture does indeed look like it's improving faster than expected."

The government has projected it will balance the budget in the 2015-16 fiscal year, although many private sector economists believe it can likely accomplish the feat in 2014-15, barring a serious setback to the economy.

The timing is significant for the Conservatives since they stand to gain a political advantage if they introduce tax cuts for Canadian families — likely some form of income splitting — before the next election scheduled for October 2015. In the 2011 campaign, the Conservatives pledged to introduce income splitting and other tax goodies once the deficit was eliminated.

The February surplus was attributed to a $2.1-billion increase in revenues, or about 8.4 per cent over the same month last year. Meanwhile, expenses increased by only about $100 million, or 0.5 per cent.

For the year to date, Ottawa says its revenues are up $10.8 billion, or 4.7 per cent, on the strength of higher personal income tax and GST revenues, non-resident tax receipts and an increase of $1.4 billion in employment insurance premiums.

Meanwhile, program expenses rose by a more modest $5.7 billion, or 2.6 per cent, made up of transfers to persons and provinces.

Charges to service the deficit decreased by about $200 million over the same period last year, the department said.

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