(Published MTimes 10 May 2019)
Despite IMF concerns about transparency and openness in the reporting on public indebtedness, the Ministry of Finance continues with its juggling of the debt figures and has reverted back to net debt measures of public debt. We have got used to these gimmicks of the Ministry of Finance: when it cannot reach its debt target it either moves the goalpost some more years further down the road or manipulates the Public Sector Debt figures. (PSD).
A statutory debt target of 50% of GDP under the Public Debt Management Act 2008, based on a local definition, was missed in 2013, and a first amendment to the PDM Act postponed the debt deadline to Dec 2018. In a further amendment in June 2017, the local definition of public sector debt was replaced by a limited “international” definition, and the debt target was changed to 60% of GDP while the deadline was further postponed to end June 2021.
The public sector gross debt rather than net debt was established as the measure for the debt ceiling. The revised PSD is now a measure of gross debt liabilities, without any netting of cash balances as it was the case previously. The statutory PSD ceiling was therefore raised in the amended PDMA to 60% of GDP, to be met by 2021. For any one fiscal year, the statutory PSD ceiling was set at 65% of GDP.
In Dec 2018 PSD stood at 64.9% of GDP. However, a new adjustment item was added to the debt table, reducing PSD by Rs2.9 billion, or 0.6% of GDP. Without this adjustment, PSD would have exceeded 65% of GDP. This “consolidation adjustment” is an arbitrary concoction to underestimate the level of PSD.
Now, in a newly released statement, the Ministry of Finance has re-introduced net PSD figures, (net of Cash Balances of non-Financial Public Sector Bodies). Why? Is it to create confusion in the mind of people about the real debt situation by publishing different measures of debt – the gross and net Public Sector Debt figures? In the context of the latest comments of the 2019 IMF Art IV report, we have to make sure that the integrity of our public debt reporting is shielded from such doubtful accounting practices.
