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Calculation of public debt concerns Shaw, AG

BY BALFORD HENRY Observer senior staff reporter balfordh@jamaicaobserver.com

Tuesday, June 24, 2014    

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OPPOSITION spokesman on Finance and Planning, Audley Shaw says that his Public Accounts Committee (PAC) of the House of Representatives will be discussing government's methodology of measuring the national debt, immediately after the current sectoral debate ends in another two weeks.

Shaw told the Jamaica Observer on Saturday that this has become absolutely necessary after Auditor General Pamela Monroe Ellis's concerns expressed in her report on the component of the Fiscal Policy Paper (FPP), which was tabled in the House of Representatives last week.

In the report Monroe Ellis, who has oversight responsibilities for the fiscal policy programme, noted that there is a difference between the definition of public debt in the Financial Administration and Audit Act (Amendment) 2014, and the coverage of the public debt being presented in FPP FY (financial year) 2014/15.

She explained that public debt, as defined in the amended Act, means "the consolidated debt of the specified public sector, including its Government guaranteed debt (after netting out the cross holdings of debt of entities within the specified public sector, other than holdings by the Bank of Jamaica)". On the other hand, the coverage for public debt in the FPP FY 2014/15 refers to the stock of public debt directly contracted by the Central Government, Bank of Jamaica debt and Government guaranteed external debt.

"Because the debt-to-GDP projections being presented in the FPP FY 2014/15 is not in keeping with the definition of public debt, I am not able to determine how the Government will achieve the stipulated debt-to-GDP target," Monroe Ellis reported.

Shaw recalled Saturday that he had raised the issue in his recent contribution to the 2014/15 budget debate.

"I have been calling for one method of measuring the debt: You can't have the International Monetary Fund (IMF) doing it one way, and the Government using another method," Shaw said.

He said that there was too much confusion measuring the debt using the Government's method, which excludes debts like the approximately US$3 billion owned by the PetroCaribe Fund.

"Can't we just settle on one consistent methodology, so that when the minister speaks about the debt to GDP his administration inherited and compares it against where the debt/GDP ratio is now, we know that he is comparing apples with apples, not apples with bananas? This debt so absorbs our energies that it is a must that it be represented truthfully, not sometimes this and sometimes that," Shaw told the House.

The Opposition spokesman proposed that the measurement of debt under the Extended Fund Facility of the IMF, which includes not just central government debt but also net Petro Caribe debt and external and domestic guaranteed debt, was more appropriate.

He claimed that the Government's method "muddies the waters and obfuscates the true state of the nation when the debt/GDP ratio is different, depending on who says it and depending on which of the Government's publications you read".

The Government's stock of debt measured $1.946 trillion, or 131.9 per cent of GDP, at the end of March 2014.

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