of expenditure presented in August was of course inadequate to meet the enlarged programme, and the special war expenditure during the present fiscal year will probably reach the total amount of the appropriation, viz., $50,000,000. The expenditure to date has been $38,000,000.
Taking all the foregoing into consideration, the increase of Canada's national debt for the year would probably aggregate $110,000,000. In this I am, of course, including our expenditure for war.
In addition to the expenditures to which I have referred, the Dominion has made advances on investment account under statutory authority and has met its sinking fund obligations as usual, the funds required to be found for these purposes aggregating $5,000,000. We also provided for the retirement of £1,700,000, or $8,500,000 in currency, of yearling Treasury Bills which matured in November last.
The House will from the statements I have made gather that the task of finding money for our requirements as outlined has been somewhat onerous. For four or more months after the outbreak of war international money markets^" were closed to new issues. By December, after the successful flotation of the British war loan, an easier tone prevailed and it became possible to obtain short date money in limited amounts at fairly reasonable rates. Capital was still, however, averse to permanent investment, although evidence was not wanting of improvement in that regard. Any prospect. of general resumption in this respect in Great Britain was, however, terminated by the announcement by the British Treasury authorities on January 18, that owing to the necessity of conserving the financial resources of the country during the war, fresh issues should thereafter be made only with their approval. Issues for undertakings outside the British Empire were prohibited. Issues for undertakings within the United Kingdom are to be allowed only if considered advisable in the national interest; those for undertakings in the British Empire overseas only where ' urgent necessity and special circumstances exist.
To meet our financial requirements since the August session the following steps have been taken:
We arranged with the Imperial Government for advances from September until March 31 of £12,000,000, or say $60,000,000,
of which we have received to date £8,000,000, or $40,000,000.
We issued for Dominion purposes Dominion notes to an amount of ten million dollars in excess of the additional issue of $15,000,000 authorized by Parliament at its last session. For this I am introducing special legislation confirmatory of our action.
We borrowed five million dollars from the Bank of Montreal.
We issued after the successful flotation of the British war loan £3,000,000 of six months Treasury Bills negotiated at 4J and 4J per cent and maturing in June next.
We sold at a net price of 94J £1,300,000 ($6,500,000) of our"l 940-60 stock to meet the private requirements of our investing clientele in London.
By these means we have arranged our finances until the end of March of the present fiscal year. At present we have substantial balances to our credit both here and in London.
So far as floating indebtedness is concerned, we shall therefore enter upon the new fiscal year with £3,000,000 of Treasury Bills maturing in June and a bank indebtedness of $5,000,000. Apart from -these we have no maturing loans to meet until the year 1919, a most satisfactory situation which I am disposed to attribute to the policy hitherto followed by the Dominion of financing by selling its permanent stock at such prices as could from time to time be obtained rather than by issuing short date loans in the hope of more favourable conditions developing later.
As regards our borrowings from the Imperial Government, our arrangements are that we shall pay interest at the same rate as is paid by the Imperial Treasury upon its war loans, from the proceeds of which advances are to be made to us. At such time or times in the future as may be agreed upon between the British Chancellor of the Exchequer and the Canadian Minister of Finance, a Canadian war loan or loans will be issued and the borrowings from the Imperial Government repaid. It seems to me that no fairer terms could be named than those so generously accorded us by the Imperial authorities.
Revenue and Expenditure, 1915-16.
In approaching the question of our finances for the coming fiscal year beginning April 1st next it will be advisable to give preliminary consideration to prevailing
trade conditions, because upon such conditions -will depend the amount of revenue which will be derived from all sources and particularly from customs, which is our principal mainstay in the matter of income. Since the outbreak of war there has of course teen a most serious interruption of our international trade. Commercial dealings with enemy nations have been automatically shut off. The increased risk of ocean traffic and higher freights have had their influence. The demoralization of the rates of exchange, which are now happily becoming normal, was for several months a serious detriment to international transactions.
In addition, our import and export trade was for a considerable time and is still in some degree adversely affected by the interruption of our merchant marine service through the chartering of so many steamships for the transport of our troops and tne engagement of a part of our shipping by the Imperial authorities. The falling-off of immigration, the departure from Canada of reservists and of our own contingent have also had their effect. But by far the most important factor has been the curtailment of our borrowings abroad. This has been the outstanding feature of the economic effect of the war upon Canada. Canada has been borrowing at the rate of from two to three hundred million dollars annually for some years past. For the six months preceding the war our loans abroad and principally in Great Britain aggregated two hundred million dollars, or over a million dollars a day. These borrowings represented the sale of securities by the Federal and provincial Governments, by municipalities and by railway, public utility, industrial and financial corporations. For the most part the purpose of loans so effected was to provide funds for the construction of public undertakings, works and services, railways and industrial and other plants and establishments. The war at once cut off this stream of borrowed money, and only recently have there been evidences of its resumption upon a greatly reduced scale. Until the war is over and for a considerable period afterwards it is not probable that monetary conditions will permit of the issue of securities even of the highest character other than for war purposes in any such volume as that to which we have been accustomed in the past. This interruption of the influx of capital has neces-6i
sarily meant marked curtailment of expenditure upon undertakings, works and buildings in all parts of Canada with consequent reaction upon the industries, trades and businesses furnishing, material and supplies therefor. The result has been a material slackening of general * constructional activity, considerable unemployment and attendant diminished buying power on the part of the community. Commercial houses are exercising prudence in commitments and the public generally are practising economy, that is to say they are buying less both of domestic and imported produce. The result of all this has been a rapid change in the volume of our imports and exports. For the nine months ended December 31 of the present fiscal year our total exports (merchandise only) amounted to $353,000,000 as compared with $380,000,000 for the corresponding period of the previous year, a decrease of $27,000,000. For the same nine months of the present year our imports (merchandise only) have been $391,000,000, a decline of $112,000,000 over those for the corresponding period of the previous year. Thus the ratio of decrease in our exports has been much less than in the case of our imports. The total trade for the first nine months of the present and last fiscal years was $745,-' 000,000 and $885,000,000 respectively. In 1912 the so-called adverse balance of trade against Canada was $225,000,000; in 1913, $300,000,000; in 1914, $180,000,000. From present indications it would appear that we shall to a large degree overtake this balance. In view of the decrease in our borrowings which have accounted in large measure for our excess of imports, this condition is what we should naturally expect, Our exports will, it is to be hoped, so increase as to enable us with such borrowings as may be obtained outside of Canada, to pay any trade balance against us together with our interest maturing abroad without resort to gold exports.
From what I have stated it is apparent that with the war still continuing we may expect for the year 1915-16 diminishing imports and consequently reduced revenue as compared with the present year in which there have been four ante-bellum months. Upon the present basis of duties of customs and excise we estimate that our revenue from all sources for the coming year would not exceed $120,000,000. So far as expenditures are concerned the policy we