Published in Le Mauricien, 17 August 2018
Lately, public sector debt has attracted a number of concerns in respect of its definition and measurement. As for all economic and statistical data, different definitions and measurements are possible depending on the aim of the analysis. The overall debt exposure accounts for commitments taken when signing loans, lines of credit, and other financial obligations, and thus measures all debt obligations contracted, whether disbursed or undisbursed.
Lately, public sector debt has attracted a number of concerns in respect of its definition and measurement. As for all economic and statistical data, different definitions and measurements are possible depending on the aim of the analysis. The overall debt exposure accounts for commitments taken when signing loans, lines of credit, and other financial obligations, and thus measures all debt obligations contracted, whether disbursed or undisbursed.
Another measure, especially used by international financial agencies, is to look at only debt disbursed, instead of debt committed. The precise terminology is “DoD”, or debt outstanding and disbursed, to account for repayments and arrears as well.
Individual countries mainly need to assess their overall debt exposure, or debt commitments, while international agencies are more interested in global debt flows, or debt disbursements. In practice, a complete debt analysis of a country debt reviews the status of both debt commitments and disbursements.
In Mauritius, the focus on public sector debt arises additionally from the existing legal framework to ensure fiscal responsibility, as contained in the Public Debt Management Act (PDMA), and reflected in a statutory public sector debt ceiling in relation to GDP. PDMA defines public sector debt as any “debt incurred” by Government and public enterprises. It is reasonable to assume that the aim of PDMA is to highlight the country’s overall debt exposure, and that “debt incurred” means “debt committed”, not “debt disbursed”.
The Ministry of Finance has tried to clarify the debt issue by recently publishing the debt details of public enterprises, including a list of all public enterprises included in the computation of public sector debt. The SBM subsidiary channeling the signed Exim Bank line of credit of USD150 million is included, but with a zero amount, to indicate that no disbursement has yet been made. This “debt disbursed” definition is not in line with the letter or spirit of PDMA. If an amount of USD 50 million is disbursed in 2018, only this disbursed amount would be considered as debt, although Government has committed to guarantee a total of USD150 million. In other words, what is not disbursed is not debt. This suits Government as it records a lower level of public sector debt.
But the objective of our fiscal responsibility legislation is surely to monitor and control the growth of our overall public sector debt exposure, to ensure that the debt is sustainable in the future. The Ministry should publish its debt tables of public enterprises to show debt commitments as well and not just debt disbursements.
The non-inclusion of state owned Special Purpose Vehicles, such as Metro Express, in the list of public enterprises for the computation of public sector is justified only if their debt liabilities arise from the SBM subsidiary. However, should these SPVs incur debt from other sources, these debt obligations would need to be added to public sector debt. It is also questionable whether Government future debt obligations towards Mauritius Telecom on the safe city project, on an operating lease of assets financed by a Government Guaranteed line of credit from China Eximbank, should not form part of the overall public sector debt exposure.
Government should be commended for enlisting the support of the IMF for the application of the International Public Sector Accounting Standards, even if by the future date of 2022. However, a proper and comprehensive computation of public sector debt data, as suggested above, is a far simpler exercise that can be done without delay.
The Ministry of Finance would be well inspired to look at the Annual Report on Public Debt presented to the Parliament of Uganda, which is far more advanced than Mauritius in terms of fiscal debt transparency. The Report comprises data on Uganda’s total debt exposure as the sum of (1) debt outstanding and disbursed and (2) debt undisbursed, in addition to details of commitments and disbursements, creditor terms, government guarantees, and contingent liabilities under public private partnerships, as well as a debt sustainability assessment.
