Photo: The Canadian Press - THE CANADIAN PRESS/Denis Beaumont

The federal government continues to make progress in its drive to eliminate the deficit by next year, the latest accounting from the Finance Department shows.

In the first report on its financial position for the new 2014-15 fiscal period, the department said it posted a combined $1.15 billion deficit for April and May, the first two months of the fiscal year. That compares to a $2.7 billion shortfall last year in the same period.

The improvement was mostly on the revenue side as the government took in $1.6 billion, or 3.8 per cent, more than in the April-May months last year, while program expenses increased only $216 million, or 0.6 per cent.

Debt charges were $167 million lower.

The government's budgetary track shows Ottawa making great strides in its efforts to balance the budget by 2015, when the Harper Conservatives are scheduled to hold an election.

The February budget shows the deficit shrinking from $16.6 billion in 2013-14 to $2.9 billion this fiscal year, which runs from April to next March, before the red ink turns into black and Ottawa records the first surplus in nearly a decade at $6.4 billion in 2015-16.

Analysts believe the government is already about $4 billion ahead of pace as the preliminary estimate on last year's deficit is actually in the $12 billion range, although the final accounting won't be known until the fall.

Still, the expectation is that in the coming months Ottawa's books will be showing fewer and smaller monthly shortfalls, turning to surpluses by the end of the year.

By individual months, Ottawa said April produced a $1.4 billion deficit, but May brought a tiny surplus of $267 million.