Debt-to-GDP ratio can reach 100pc in 10yrs
16 March, 2023, 6:15 pm
Deputy Prime Minister and Minister of Finance Professor Biman Prasad says if the Government does not look at the fiscal consolidation, does not achieve reasonable sustainable levels of economic growth and do not have good revenue policies, then the country’s debt-to-GDP ratio could reach nearly 100 per cent in 10 years.
He said they are hoping for a good economic growth.
“What we are saying is that if we do not do the right thing, if we do not look at fiscal consolidation, if we do not achieve reasonable sustainable levels of economic growth, if we do not have good revenue policies, which could mean looking at compliance, looking at various taxes, all these things will have to be put together as a package for us to set a foundation so that we are fiscally responsible and over the period of time, we keep reducing our debt and indeed the debt to GDP ratio,” Prof Prasad said.
“So, if we achieve a good economic growth, which we are hoping, that will be the case you know, the recovery is very good.
“So, on one hand, you have economic growth, on the other hand, you are looking at consolidating your expenditure, you are also looking at raising revenue so, all those three elements together will help sustain the debt levels and over a period, reduce the debt to GDP ratio, reduce the debt.
“If you have the GDP increasing, and if you are controlling your expenditure which is fiscally responsible, there is no wastage, there is a value for money, and on the other hand, if the economy is growing, and your taxes are good, and you’re raising the revenue, then you will be able to reduce the debt to GDP ratio over time.
“So that’s what I meant. I said, if we don’t start doing anything now, and in the next budget, and in subsequent budgets, then in 10 years’ time, we could be reaching 100 per cent or more debt to GDP ratio.”
He said the Fiscal Review Committee will look into formulating a package of policies to sustain the economic growth.
“So that’s what we are saying, what is important is what we do now, from today, and that is why we have appointed a Fiscal Review Committee, which has got some very good people and a very good mix of people.”