Charlie McCreevy
Question:9 Mr. McCreevy asked the Minister for Finance the projection, if any, he has for the national debt for the end of 1997; and his views on whether the figure will rise or fall thereafter. [7726/97]
Written Answers. - National Debt Projections.
In general, the main factor affecting changes in the national debt is the Exchequer borrowing requirement. However, there are certain other factors such as discounts or premiums on bonds issued and, in particular, exchange rate movements which can also affect the stock of debt outstanding.
It is not possible to predict market developments over the course of 1997 and, therefore, the end-year position cannot be forecast with precision. If all other factors are neutral, the national debt will increase by an amount equal to the EBR which was forecast at £637 million in last January's budget. A similar situation applies to subsequent years with the budget projecting EBRs, on a non-policy change basis, of £856 million and £698 million for 1998 and 1999 respectively. These projections are inclusive of the prudent contingency provision.
However, the Deputy will appreciate that the most important indicator of debt is not the absolute level of debt outstanding but the ratio of debt to GNP or GDP as this measures the economy's capacity to carry the debt burden. In this regard, the last decade has seen significant falls in the ratio of national debt to GNP from a peak of 125 per cent in 1987 to 82 per cent by the end of 1996. Similarly, general Government debt as a proportion of GDP, the relevant measure for Maastricht purposes has fallen from almost 117 per cent in 1986 to less than 73 per cent by the end of 1996 and is now in line with the EU average.
The Government's policy is to continue to reduce the general Government debt to GDP ratio towards 60 per cent at a satisfactory pace, as required by the Maastricht Treaty. The economic background to the budget forecast that, on the present basis of computation, this ratio would fall further to 69 per cent in 1997, 67 per cent in 1998 and 64 per cent in 1999.
However, it should be noted that, in 1999, new accounting conventions for Maastricht reporting will be introduced with resultant changes in the measurement of the values of general Government debt and GDP which will add some 7 per cent to the ratio of general Government debt to GDP in 1999. These technical changes will not affect the underlying downward trend in the ratio which, as indicated in Partnership 2000, could be reduced to 60 per cent early in the 21st century.