Overseas debt figure set to rise

Press, 27 June 1989, Page 2

Overseas debt figure set to rise

By

PATTRICK SMELLIE

in Wellington

Overseas debt figures are expected to be revised upwards as much as $8 billion today, with the release of a new Statistics Department survey of short-term overseas debt.

Previously, only longterm debt — loans for more than a year — have been counted.

Particularly because of the freeing up of financial markets since 1985, a measure of short-term debt has become necessary.

The most recent survey of total long-term debt was $28.62 billion, at the end of March this year.

Estimates of total shortterm overseas debt are in the region of $6 billion to $8 billion. The new survey will stop the trend over recent months for New Zealand’s overseas debt to fall.

Long-term debt reached a peak at 68.3 per cent of gross domestic product in March, 1987, but had fallen back to 45 per cent at the last measure. The addition of $8 bib lion of previously uncounted debt would push the proportion of overseas debt to about 55 per cent of G.D.P.

By world standards even a ratio of 45 per cent of G.D.P. is considered high. Australia was recently warned it would have its credit ratings downgraded

because its overseas debt was heading towards 30 per cent of G.D.P.

Economists did not expect the new survey to have a big effect on interest rates or the exchange rate unless the figure was significantly larger than anticipated. They predicted the new survey could pick up previously uncounted longterm debt, since it took in more businesses than the old long-term debt survey. The survey result could also require a further revision of the balance of payments, due to the discovery of new, previously uncounted debt servicing payments. He criticised the department for not making earlier efforts to count New Zealand’s earnings on its overseas assets.

While the department did intend to start this, it appeared to be at least a year away.

It was likely receipts from overseas assets owned by New Zealanders would be “a very big number,” which would result in another revision of the balance of payments when it was calculated.