Public debt redefined - Shaw says ratio to dip nine percentage points following changes to meaning
Finance Minister Audley Shaw on Tuesday announced that the Government has revised the definition of the public debt, a move he believes will reduce confusion going forward.
Shaw told The Gleaner that the new phrasing will make the Government's definition and that of international organisations such as the International Monetary Fund (IMF) consistent.
"Over the years, we have seen where our stock of debt is listed higher than how the IMF measured it. They had a lower debt ratio than us over the years, but now that we have adopted this new system, it is now aligned with how the IMF measures the debt - which is an international standard," Shaw argued.
The public debt, the finance minister explained, is money that the Government borrows from local or international markets, or from multilateral organisations, including the IMF and the Caribbean Development Bank.
The finance minister, during his presentation in the Standing Finance Committee of Parlia-ment, said the new definition of public debt will see the debt-to-GDP ratio being reduced by nine percentage points at April 1 this year.
"Under the new definition of the [public] debt, the debt-to-GDP ratio comes down from 124 to 115 per cent by the end of March of this year ...," the finance minister stated in Parliament.
Shaw told The Gleaner that the decision was made because some debts were being measured both as a public body debt and a central government debt.
"It is a bookkeeping exercise ... because of the accounting methodology that was being employed, the public debt was actually being overstated. There was double counting of the debt in some instances."
Shaw also disclosed that the debt accrued to operate the Bank of Jamaica will not be included in the definition of the public debt.
"The Bank of Jamaica debt is not money that was borrowed. It is losses that were incurred because of the operation of the bank," Shaw said, adding that at times, the central bank makes a profit while at other times it records a loss.
The finance minister is projecting that by the end of this year, the debt to GDP will be reduced to 108 per cent.
In the past, Shaw, along with the Auditor General Pamela Monroe Ellis, has raised concerns about the definition of the public debt, citing inconsistencies in the definition in government documents in which debt is being reported.