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Commercial Times: What magic did the Cabinet do?

Commercial Times: What magic did the Cabinet do?

According to a report presented by the Ministry of Finance to the Legislative Yuan, the outstanding debt of the central government this year is expected to drop to 36.2 percent of the average GDP of the last three years, still 4.4 points away from the 40.6 percent debt ceiling. In fact, the outstanding debt of the central government already reached 39.1 percent of GDP in 2004. How can the debt-to-GDP ratio have been dropping despite continued borrowing over the years? What magic did the government do? The real reason behind the fall is that over the past 10 years, the government has revised the rules regarding the compilation of national income statistics three times -- in 2005, 2009 and 2014. The three revisions significantly inflated the scale of Taiwan's GDP, which in turn diluted the debt-to-GDP ratio. The government's debt burden is far heavier than what is suggested by its nominal figures. Besides borrowing NT$200 billion to NT$300 billion every year, the government has a huge unfunded obligation, which had reached NT$17 trillion as of the end of June 2014. The drop in debt-to-GDP ratio is true only in nominal terms. If the government does not develop new financial streams, cut spending and conduct tax reforms, the expansion of borrowing capacity will be the beginning of a disaster. (Editorial abstract -- April 30, 2015) (By Y.F. Low)


Updated : 2021-09-20 13:31 GMT+08:00