What Lies Beneath: The Statistical Definition of Public Sector Debt. An Overview of the Coverage of Public Sector Debt for 61 Countries

Abstract

While key macroeconomic indicators such as Gross Domestic Product (GDP) or Consumer Price Index (CPI) are based on internationally accepted methodologies, indicators related to the debt of the public sector often do not follow international standards and can have several different definitions. As this paper shows, the absence of the standard nomenclature can lead to major misunderstandings in the fiscal policy debate. The authors present examples that show that debt-to-GDP ratios for a country at any given time can range from 40 to over 100 percent depending on the definition used. Debt statistics, for example, may include or exclude state and local governments and may cover all debt instruments or just a subset. The authors suggest that gross debt of the general government (gross debt) should be globally adopted as the headline indicator supplemented by other measures of government debt for risk-based assessments of the fiscal position. Broader measures, including net debt and detailed information on contingent liabilities and derivatives, could be considered. The standard nomenclature of government and of debt instruments helps users understand the concepts in line with the Public Sector Debt Statistics Guide. Use of more standard definitions of government debt would improve data comparability, would benefit IMF surveillance, programs, and debt sustainability analysis, and would help country authorities specify and monitor fiscal rules. Data disaggregated by government subsector and debt instrument for 61 countries from the IMF‘s Government Finance Statistics Yearbook (GFSY) database are presented to illustrate the importance and viability of adopting this approach.