OTTAWA—The federal government ended the fiscal year with a $14-billion deficit despite higher revenues, framing the fiscal challenge for political parties as they cost out their pledges and dangle the promise of balanced books.

With federal political leaders on the campaign trail, Tuesday’s release of the annual financial report detailing the state of the government’s finances underscores again the Liberals’ broken 2015 election vow to balance the books by the current fiscal year.

The Finance Canada report shows that the deficit was slightly less than the $14.9 billion forecast in the March 2019 budget.

Personal and corporate income tax revenues rose by $12.9 billion, attributed to low unemployment, and strong company earnings in sectors such as finance, manufacturing and wholesale trade, the report showed.

Higher expenses partially offset the extra revenues, notably in transfers to persons, such as seniors and children’s benefits (up by $2.3 billion), and transfers to other levels of governments for programs such as health and social services were up $5.4 billion. Direct program expenses — the cost of running 130 departments, agencies, Crown corporations and other agencies — rose by $6.9 billion, or 4.8 per cent.

While Canada’s economy has performed well — unemployment is at a 40-year low — the report does caution about conditions ahead, noting that the economic expansion cooled in 2018, marked by lower oil prices and slower housing activity in the second half of the year.

“There remain important uncertainties and risks in the global and domestic economies,” the report said.

Kevin Page, president and CEO of the Institute of Fiscal Studies and Democracy, said the deficit, spending and revenue numbers are in line with assumptions made by the Parliamentary Budget Officer for his costings of the campaign promises by the political parties.

“This is good news. A big divergence from PBO assumptions could call into question the validity of the baseline used for costing. This is not the case. PBO and political parties can breathe normally,” Page, the former parliamentary budget officer, said in an email.

The Liberals promised in the 2015 campaign to balance the budget and reduce the federal debt-to-GDP ratio to 27 per cent by 2019-20. That promise was dropped early in their mandate and the most recent budget projected a $19.8 billion deficit in 2019-20, dropping to $9.8 billion by 2023-24.

The Liberals have given up talking about balanced budgets and instead say a declining debt-to-GDP ratio is now their deficit benchmark. In the campaign so far, they have made promises with an annual cost of at least $1.3 billion by 2023-24, according to party estimates not verified by the budget officer.

The Parliamentary Budget Officer has assessed the cost of the Conservative promises so far at almost $7 billion a year by 2022-23.

The Conservatives promised before the Oct. 21 election to balance the books within five years and party Leader Andrew Scheer says that over the course of the campaign, they’ll show how they will intend to make good on that pledge.

“Given the magnitude of recent announcements by Conservatives, it will be very challenging and potentially risky … to balance the books over the medium term,” Page said.

Among the highlights:

The deficit of $14 billion rings in less than the $14.9 billion forecast in the 2019 budget. That is down from the $19 billion in 2017-18.

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Federal revenues increased by $21 billion, or 6.7 per cent, from 2017-18. Program expenses increased by $14.6 billion, or 4.7 per cent. Public debt charges rose by $1.4 billion, or 6.3 per cent.