Dáil Éireann Debate, Tuesday - 15 November 2011
48 Deputy Richard Boyd Barrett asked the Minister for Finance his view on whether GNP is a more appropriate measurement of debt than GDP; his views on whether the figures (details supplied) suggest that the debt burden here is going to top 150%; and if he will make a statement on the matter. [34458/11]
View answerGeneral Government debt is forecast in the recently published Medium-Term Fiscal Statement (MTFS) to reach almost €195 billion by 2013. Based on the nominal GDP and GNP forecasts presented in the MTFS, this equates to a debt/GDP ratio of 118 per cent and a debt/GNP ratio of 147 per cent. I understand that Mr. Whelan's estimate of the debt/GNP ratio exceeding 150 per cent is taken from his working paper ”Ireland’s Sovereign Debt Crisis” which was published back in May and might therefore be a little out of date. It is common practice to express General Government debt as a percentage of GDP. This allows for consistent, cross-country comparative analysis to be made.
GDP is the relevant measure in the context of the tax revenue base. In an Irish case, the profits made by multinational firms based here, which are counted as part of GDP but not GNP are part of the tax revenue base.
The percentage of tax revenues and GDP which are accounted for by debt interest expenditure are important measures of debt sustainability. The MTFS forecast that the equivalent of some 19 per cent of tax revenues or around 4½ per cent of GDP will be required to pay interest on the national debt by 2015. While a significant level, it is worth bearing in mind that these ratios are well below those experienced in the mid-1980s when the equivalent of around a third of tax revenues or close to 10 per cent of GDP were used for that purpose.
