By Paul Vieira


OTTAWA--Canada posted a budget surplus in February, putting the public finances in a better-than-expected position ahead of the Liberal government's release next week of an economic and fiscal update.

Canada recorded in February a budget surplus of $5.66 billion Canadian dollars, or the equivalent of $4.13 billion, the Department of Finance said Friday in its monthly Fiscal Monitor publication. That surplus is narrower than a year-earlier windfall of C$7.57 billion.

With just one month left in the 2025-26 fiscal year, the public-finance data indicate Canada has a budget deficit of C$25.55 billion, which on paper looks to come in well short of the projected C$78.3 billion deficit that the government forecast last fall in its annual budget plan. However, finance ministry data have historically tended to show sizable deficits in the month of March, or the last month of the fiscal year, due to adjustments to tax receipts.

Canadian Finance Minister Francois-Philippe Champagne is scheduled to introduce an economic and fiscal update on Tuesday. Economist Rebekah Young from Bank of Nova Scotia said bond-issuance data suggests the 2025-26 budget deficit will be close to the earlier forecast. She said any new spending in the update could be offset by any potential fiscal windfall stemming from higher energy prices.

She added traders who review the update will be looking for signs that the Liberal government's "investment agenda is gaining traction as some investors may remain cautious on execution-and geopolitical-risk."

The finance department report for February indicated total tax revenue fell 7.2% from a year ago to C$40.32 billion. Drops in personal and corporate tax receipts was partly offset by a notable gain in sales-tax revenue.

Meanwhile, Canadian government outlays on programs and day-to-day administration fell 2.8% from a year earlier in February to C$38.45 billion, reflecting a drop in fiscal transfers from Ottawa to provincial governments. Total expenses, which incorporate public-debt charges and other outlays, fell 2.1% to C$42.76 billion.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

04-24-26 1115ET