Finance Minister Joe Oliver says he will not budge from his plan to deliver a balanced budget come April, even with the recent decline in crude oil prices.
In an interview with The Canadian Press at the World Economic Forum in Davos, Oliver said he's rejecting suggestions that a small federal budget deficit would be economically acceptable and he insisted the government won't return to a deficit.
Oliver's comments came a day after the Bank of Canada shocked the business world by dropping a key lending rate by one-quarter of a percentage point in response to the huge decline in crude oil prices since November.
The finance minister said that he wasn't aware in advance of the Bank of Canada's decision to cut its trend setting rate Wednesday to 0.75 per cent, but added he was "not surprised" by the announcement.
Since last summer, the global price of oil plunged from more than US$100 a barrel to under US$50 a barrel — with the biggest drop coming after the OPEC oil cartel said in late November that it wouldn't cut output to prop up the price.
The low price of crude is expected to remain for some time and many Canadian oil and gas producers have announced plans to cut back spending by billions of dollars — creating a ripple effect through the entire economy.
Oliver announced last week he would postpone the release of the 2015 federal budget until April at the earliest.
Despite the criticism from opposition parties, Oliver says it will give him more time to analyze the situation.
Oliver wouldn't say if the government would dip into its $3 billion contingency fund to offset the loss of federal revenues from oil, but acknowledged his "flexibility" has decreased.
On the weekend, employment minister Jason Kenney told CBC Radio's The House that fund was for unforeseen circumstances and suggested the government would rather freeze or cut spending rather than dip into the fund.
But Andrew Saxton, Oliver's parliamentary secretary, said Tuesday on CBC News Network's Power & Politics that the "unforeseen" drop in oil prices is a reason to dip into the contingency fund.
"The contingency fund is there for contingencies, contingencies are unforeseen circumstances, lower oil prices were an unforeseen circumstance," Saxton said when asked about the fund by host Evan Solomon.
"What is foreseen is that we are going to balance the budget and we are going to continue to put money back in the pockets of Canada families and Canadian seniors," Saxton said.
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