Barker warns of high debt level

ECONOMIST Paul Barker says exceeding the set national debt level can be attributed to poor budget forecasting and management, and lack of fiscal transparency and consultation.
The executive director of the Institute of National Affairs was commenting on the Government’s Mid-Year Economic and Fiscal Outlook Report released by the Department of Treasury.
He said the fiscal outlook for 2016 declined in the first half year, resulting in a net borrowing (deficit) of K3.9 billion or 5.9 per cent of GDP – an increase of K1.8 million.
This compared with the initial net borrowing (deficit) of K2.1 billion or 3.1 per cent of GDP at the time of the 2016 Budget.
“This is certainly an economic and fiscal and debt management problem, as well as a legal issue,” Barker said.
“There’s nothing technically or economically sacrosanct about the 35 per cent debt to GDP figure. Several developed economies do exceed that level of debt.”
But he said it was a strong yardstick which the Government should not exceed, and by law was not allowed to exceed.
“There is some justification for countries to stimulate the economy through some deficit budgeting during economic downturns,” Barker said.
“That’s part of the function of the Sovereign Wealth Fund when it’s finally up and running to help knock off the peaks of revenue and fill in the troughs.
“The trouble is that rather than saving in the peaks, we’ve been borrowing (in 2012/13) when commodity prices were high, and have no savings which have been prevalent especially in 2015 and 2016, therefore revenue dropping back further.”