Last week, an opposition lawmaker took issue with the central government’s financial health, after the Ministry of Finance’s latest “National Debt Clock” data showed that the average debt per capita had climbed to NT$274,000 (US$8,484.55) as of May 10, an all-time high for Taiwan.
The nation’s outstanding debt with a maturity of more than one year was NT$5.994 trillion and the amount of short-term outstanding debt was NT$419.1 billion, based on the ministry’s data. Overall, the national debt totaled NT$6.413 trillion, equivalent to NT$274,000 per capita on average, compared with NT$250,000 at the end of last year and an average of NT$242,000 over the past eight years under former president Tsai Ing-wen (蔡英文).
The ministry denied that the nation’s debt problem had deteriorated, as suggested by Chinese Nationalist Party (KMT) Legislator Lee Yen-hsiu (李彥秀), adding that the rising debt mainly stemmed from short-term fund management, especially an allocation of NT$100.1 billion to Taiwan Power Co for the state utility’s recapitalization needs. After the ministry on Saturday paid off short-term loans of NT$48 billion, the debt figure would drop to NT$272,000 per capita on average, it said, adding that the number would fall further following a NT$115 billion debt repayment scheme expected to start next month.
The ministry began publishing the “National Debt Clock” data online in December 2010 to remind government agencies to monitor their spending and maintain fiscal discipline. The national debt includes long-term and short-term debt, with the short-term debt tending to be volatile as the ministry manages short-term loans for various funds.
As a result, the ministry sees the ratio between the outstanding balance of its long-term debt and the average GDP over the past three years as a perfect gauge of the nation’s debt burden, aiming to keep central government borrowing below the legal limit stipulated in the Public Debt Act (公共債務法) at 40.6 percent of average GDP over the past three years.
As the debt ratio has remained within an appropriate range over the past few years — at 28.3 percent last year and 26.5 percent as of May 10, compared with 33 percent in 2016 and a peak of 36.3 percent in 2012 — the ministry said there is no expected fiscal deterioration and no growing debt burden.
National debt tends to climb in the first half of a year due to government agencies’ needs at the start of the year, such as Lunar New Year holiday bonuses for civil servants and national health insurance subsidies, as well as funds earmarked for local governments, with the figure usually moving lower in the second half following the collection of tax revenue.
After all, Taiwan’s national debt is still manageable and the nation’s financial risks remain low. Nevertheless, there is no denying that the central government’s outstanding balance of long-term debt increased from NT$5.398 trillion in 2016 when Tsai took office in May of that year. How to bolster fiscal resilience and continue to reduce its debt burden is a major challenge facing Minister of Finance Chuang Tsui-yun (莊翠雲).
What is important for the nation is not the debt, but whether the money borrowed is used to drive economic growth and further national development. Taiwan’s debt problem might be less serious than that of many other countries, but the government needs to adhere to fiscal discipline and always retain enough revenue to be prepared for potential shocks.
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