Debt-servicing big part of Govt expenditure

Press, 31 August 1984, Page 4

Debt-servicing big part of Govt expenditure

By

OLIVER RIDDELL

Debt-servicing — with social services spending — had contributed significantly to the over-all increase in Government expenditure in the last 10 years, the Treasury said. Debt-servicing had risen from an average 7.5 per cent of net expenditure in 1975-78 to a forecast 16.1 per cent for 1984-85. During the next three years, the combination of spending in debt-servicing and social services was ex-

pected to rise from 42.7 per cent of net expenditure in 1983-84 to about 50 per cent in 1986-87, the Treasury said. This meant that as servicing the public debt grew there would be less for health, education, and other areas. The most recent overseas exchange transactions forecasts gave an official debt/gross domestic product ratio of 30.8 per cent for the year ended June, 1986, and an official debtservicing ratio of 17.7 per

cent. Longer term forecasts showed the official debt ratio reaching 34.0 per cent in 1991-1992 and the debtservicing ratio reaching 29.3 per cent. The Treasury said that under a fixed exchange rate regime there was no alternative to borrowing externally if the combined current and capital accounts were constantly in deficit, and a certain level of reserves had to be maintained to support the fixed exchange rate.