- 1 Where does Russia get its money
- 2 How much debt does the Netherlands have
- 3 Which EU country has the most debt
- 4 Which country has lowest debt
- 5 Who is Russia’s biggest trading partner
- 6 What is Russia’s biggest source of income
Where does Russia get its money
- Fitch :
- Outlook: N/A
The economy of Russia has gradually transformed from a planned economy into a mixed market-oriented economy, It has enormous natural resources, particularly oil and natural gas, It is the world’s 11th -largest economy by nominal GDP, and 6th-largest by purchasing power parity (PPP).
- Due to a volatile currency exchange rate, Russia’s GDP as measured in dollars fluctuates sharply.
- Russia’s membership to the WTO was accepted in 2011.
- Russia’s vast geography is an important determinant of its economic activity, with the country holding a large share of the world’s natural resources,
It has been widely described as an energy superpower ; as it has the world’s largest natural gas reserves, 2nd-largest coal reserves, 8th-largest oil reserves, and the largest oil shale reserves in Europe. It is the world’s leading natural gas exporter, the 2nd-largest natural gas producer, and the 2nd-largest oil exporter, and producer,
Russia’s foreign exchange reserves are the world’s 4th-largest, It has a labour force of roughly 70 million people, which is the world’s 7th-largest, Russia is the world’s 3rd-largest exporter of arms. The oil and gas sector accounted up to roughly 40% of Russia’s federal budget revenues, and up to 60% of its exports in 2019.
Russia has the world’s 5th-largest number of billionaires. Russias inequality of household income and wealth remains comparatively high. Following the 2022 Russian invasion of Ukraine, the country has faced several sanctions and boycotts from the Western world and its allies, to isolate the Russian economy from the Western financial system.
How much debt does the Netherlands have
1999 – 2023 | Quarterly | % | CEIC Data Key information about Netherlands Government Debt: % of GDP
Netherlands Government debt accounted for 48.3 % of the country’s Nominal GDP in Mar 2023, compared with the ratio of 50.1 % in the previous quarter. Netherlands government debt to GDP ratio data is updated quarterly, available from Dec 1999 to Mar 2023. The data reached an all-time high of 68.9 % in Mar 2015 and a record low of 43.0 % in Dec 2007.
CEIC calculates quarterly Government Debt as % of Nominal GDP from quarterly Government Debt and rolling sum of quarterly Nominal GDP. Statistics Netherlands provides Government Debt in EUR and Nominal GDP in EUR. Related information about Netherlands Government Debt: % of GDP
In the latest reports, Netherlands National Government Debt reached 515.7 USD bn in Mar 2023. The country’s Nominal GDP reached 272.1 USD bn in Mar 2023.
Which EU country has the most debt
General government gross (Maastricht) debt as a percentage of GDP – Maastricht debt followed an upward trend after the 2008 financial crisis. From a high point at the end of 2014 (86.9 % of GDP), at EU level, the debt to GDP ratio decreased continuously to reach 77.7 % of GDP in 2019.
Then, the ratio increased sharply in 2020 to 90.0 % of GDP, mainly due to the effects of the COVID-19 pandemic. The 2020 increase represents the steepest increase observed in the time series since 1995, and the highest level of general government gross debt as percentage of GDP recorded. Between the end of 2020 and the end of 2022, the EU general government gross debt decreased to 84.0 % of GDP.
This corresponds to a decrease of 6.0 percentage points (pp.) of GDP between the end of 2020 and the end of 2022. Compared to the end of 2021, the ratio decreased by -4.0 pp. of GDP. In the euro area, the general government gross debt decreased from 95.5 % of GDP at the end of 2021 to 91.6 % at the end of 2022 (or by -3.9 pp.). Figure 1: General government gross debt as a percentage of GDP, 2021–2022 – Source: Eurostat (gov_10dd_edpt1) Between the end of 2021 and the end of 2022, 23 EU Member States and Norway registered a decrease in their debt to GDP ratio, and 4 Member States registered an increase.
The largest decreases were recorded in Greece (-23.3 pp.), Cyprus (-14.7 pp.), Portugal (-11.5 pp.), Ireland (-10.7 pp.), Croatia (-10.0 pp.), Denmark (-6.6 pp.), Italy (-5.5 pp.), Lithuania (-5.3 pp.) and Spain (-5.0 pp.), as well as Norway (-5.1 pp.), while increases were recorded in Czechia (+2.1 pp.), Estonia (+0.8 pp.), Finland (+0.4 pp.) and Luxembourg (+0.1 pp.).
At the end of 2022, 13 out of 27 EU Member States reported debt to GDP ratios higher than the reference value of 60.0 %, while six EU Member States recorded debt to GDP ratios of more than 100.0 %: Greece recorded the highest debt to GDP ratio at 171.3 %, followed by Italy (144.4 %), Portugal (113.9 %), Spain (113.2 %), France (111.6 %) and Belgium (105.1 %).
Who has the lowest debt in Europe?
Bulgaria Bulgaria has one of the lowest levels of debt in the European Union.
Why is China so in debt?
Why China Has a Giant Pile of Debt A major lender abroad, China is facing a debt bomb at home: trillions of dollars owed by local governments, their financial affiliates, and real estate developers. During her visit to Beijing, Treasury secretary Janet L. Yellen, seen here meeting with Chinese Premier Li Qiang, has tried to persuade China to cooperate more to address the debt crisis in lower-income countries. Credit. Pool photo by Mark Schiefelbein By China, which has to some 150 developing countries, has been reluctant to cancel large debts owed by countries struggling to make ends meet.
That is at least in part because China is facing a debt bomb at home: trillions of dollars owed by local governments, their mostly off-the-books financial affiliates, and real estate developers. One of the main issues for during her visit to Beijing this week is whether she can persuade China to cooperate more to address an evolving debt crisis facing lower-income countries.
But China’s state-controlled banking system is wary of accepting losses on foreign loans when it faces far greater losses on loans within China. It’s hard to know exactly because official data is scant. Researchers at JPMorgan Chase calculated last month that overall debt within China — including households, companies and the government — had reached 282 percent of the country’s annual economic output.
That compares with an average of 256 percent in developed economies around the world and 257 percent in the United States. What distinguishes China from most other countries is how fast that debt has accumulated relative to the size of its economy. By comparison, in the United States or even deeply indebted Japan, debt has risen less precipitously.
The steep increase in China’s debt, more than doubling compared with the size of its economy since the global financial crisis 15 years ago, makes managing it harder. China’s lending to developing countries is small relative to its domestic debt, representing less than 6 percent of China’s annual economic output.
- But these loans are particularly sensitive politically.
- Despite heavy censorship, periodic complaints emerge on Chinese social media that banks should have lent the money to poor households and regions at home, not abroad.
- Accepting heavy losses on these loans would be very unpopular within China.
- Chinese construction workers walking home from work at a site in Colombo, Sri Lanka.
Credit. Adam Dean for The New York Times It started with real estate, which suffers from overbuilding, falling prices and beleaguered potential buyers. In the past two years, several dozen real estate developers that borrowed money from overseas investors have defaulted on those debts, including two more in recent days.
Developers have struggled to continue paying far larger debts to banks inside China. Compounding the problem has been borrowing by local governments. Over the past decade, many cities and provinces set up special financing units that were lightly regulated and borrowed heavily. Officials used the money to cover daily expenses, including the interest on other loans, as well as the construction of roads, bridges, public parks and other infrastructure.
The real estate and government debt problems overlap. For many years, the main source of revenue for localities came from the sale to developers of long-term leases for state land. As many private-sector developers have run out of money to bid for land, this revenue has fallen.
- The local financing affiliates have instead done the heavy borrowing to buy the land that such developers could no longer afford, at steep prices.
- As the real estate market continues to weaken, many of these financing affiliates are in trouble.
- That debt has piled up.
- Fitch Ratings, the credit rating agency, estimates that local governments have debts equal to about 30 percent of China’s annual economic output.
Their affiliated financing units owe debt equal to an additional 40 to 50 percent of national output — although there may be some double counting as local governments borrow and then shift the debt to their financing units, Fitch said. For any government or business, borrowing can make good economic sense if the money is used productively and efficiently.
- But borrowers who binge on debt that doesn’t generate sufficient returns can get into trouble and struggle to repay their lenders.
- That’s what has happened in China.
- As its economy slows, a growing number of local governments and their financing units are unable to keep paying interest on their debts.
The ripple effect means many localities lack money to pay for public services, health care or pensions. Debt troubles have also made it hard for banks in China to accept losses on their loans to lower-income countries. Yet many of these countries, like Sri Lanka, Pakistan and, now face,
- Pakistan, one of the largest borrowers from China, is among the countries facing an acute debt crisis. Credit.
- Iana Hayeri for The New York Times Almost two-thirds of the world’s developing economies depend on commodity exports.
- The World Bank forecast in April that commodity prices will be 21 percent lower this year than last year.
In 2010, only 5 percent of China’s overseas lending portfolio supported borrowers in financial distress. Today, that figure stands at 60 percent, said Bradley Parks, the executive director of AidData at William & Mary, a university in Williamsburg, Va.
China is by far the largest sovereign lender to developing countries, although Western hedge funds have also bought many bonds from these countries. The bonds tend to be at fixed interest rates. But China’s banks have tended to lend dollars at adjustable interest rates that are linked to rates in the West.
As the Federal Reserve has pushed rates up steeply since March 2022, developing countries have faced to China. If little is done to reduce their debt, many of the world’s poorest governments will continue to spend heavily on debt repayment, money that could otherwise be used for schools, clinics and other services.
- The biggest losers will end up being ordinary people in the developing world who are denied basic public services because their governments are saddled with unsustainable debts,” Mr.
- Parks said.
- China’s domestic debt overhang defies quick fixes.
- The country needs to gradually move away from debt-fueled government construction projects and heavy national security spending, toward an economy based more on consumer spending and services.
Powerful constituencies in Beijing and Chinese provincial capitals protect the current economic priorities. Ms. Yellen will be trying to learn more about China’s economic plans, but can do little to influence them. Last winter, 21 Chinese banks agreed to let a local government financing unit in southwestern China extend to 20 years the repayment of loans that were close to coming due, and said that only interest payments, not principal, needed to be repaid for the first 10 years.
- But that arrangement meant heavy losses for the banks — and almost every province in China has similarly troubled local financing units.
- Yet solving the developing country debt problem will be hard.
- Yellen’s ability to exhort China to accept debt write downs is limited,” said Mark Sobel, a former longtime United States Treasury official.
“The U.S. and Yellen have little leverage,” he added. is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic.
Who owns most of China’s debt?
China has little overseas debt, and a high national savings rate. In addition, most of the debt is state owned – state-controlled banks loaned funds to state-controlled firms – giving the government the ability to manage the situation.
Is China economy in trouble?
A Crisis of Confidence Is Gripping China’s Economy China’s economy, which once seemed unstoppable, is plagued by a series of problems, and a growing lack of faith in the future is verging on despair. A partly constructed amusement park, part of Country Garden’s Ten Mile Bay project in Nantong, China. Credit. Qilai Shen for The New York Times By and Earlier this year, David Yang was brimming with confidence about the prospects for his perfume factory in eastern China.
After nearly three years of paralyzing Covid lockdowns, China had in late 2022. The economy seemed destined to roar back to life. Mr. Yang and his two business partners invested more than $60,000 in March to expand production capacity at the factory, expecting a wave of growth. But the new business never materialized.
In fact, it’s worse. People are not spending, he said, and orders are one-third of what they were five years ago. “It is disheartening,” Mr. Yang said. “The economy is really going downhill right now.” For much of the past four decades, China’s economy seemed like an unstoppable force, the engine behind the country’s rise to a global superpower.
- But the economy is now plagued by a series of crises.
- Born from years of overbuilding and excessive borrowing is running alongside, while young people are struggling with,
- And amid the drip feed of bad economic news, a new crisis is emerging: a crisis of confidence.
- A growing lack of faith in the future of the Chinese economy is verging on despair.
Consumers are holding back on spending. Businesses are reluctant to invest and create jobs. And would-be entrepreneurs are not starting new businesses. “Low confidence is a major issue in the Chinese economy now,” said Larry Hu, chief China economist for Macquarie Group, an Australian financial services firm.
- Mr. Hu said the erosion of confidence was fueling a downward spiral that fed on itself.
- Chinese consumers aren’t spending because they are worried about job prospects, while companies are cutting costs and holding back on hiring because consumers aren’t spending.
- In the past few weeks, investors have pulled more than $10 billion out of China’s stock markets.
On Thursday, China’s top securities regulator summoned executives at the country’s national pension funds, top banks and insurers to pressure them to invest more in Chinese stocks, according to, an economics magazine. Last week, stocks in Hong Kong, down more than 20 percent from their high in January.
- From its resilience to past challenges, China forged a deep belief in its economy and its state-controlled model.
- It in 2009 from the global financial meltdown, and in spectacular fashion.
- It weathered a Trump administration trade war and proved its indispensability.
- When the pandemic dragged down the rest of the world, China’s economy bounced back with vigor.
The Global Times, a mouthpiece for the Chinese Communist Party, declared in 2022 that China was the “.” China’s president, Xi Jinping, speaking in Shanghai in 2018, when he gave a rousing defense of the economy: “You have every reason to be confident.” Credit.
- Pool photo by Johannes Eisele One factor contributing to the current confidence deficit is the prospect that China’s policymakers have fewer good options to fight the downturn than in the past.
- In 2018, with the economy in a trade war with the United States and its stock market nose-diving, Xi Jinping, China’s leader, gave a,
Mr. Xi was addressing an international trade fair in Shanghai and sought to quell the uncertainty: No one should ever waver in their confidence about the Chinese economy, despite some ups and downs, he said. “The Chinese economy is not a pond, but an ocean,” Mr.
- Xi said. “The ocean may have its calm days, but big winds and storms are only to be expected.
- Without them, the ocean wouldn’t be what it is.
- Big winds and storms may upset a pond, but never an ocean.
- When you talk about the future of the Chinese economy, you have every reason to be confident.” But in recent months, Mr.
Xi has said little about the economy. Unlike past crises that were international in nature, a convergence of long-simmering domestic problems is confronting China — some a result of policy changes carried out by Mr. Xi’s government. After the 2008 financial crisis, China unleashed to get the economy moving again.
- In 2015, when its real estate market was teetering, Beijing handed out cash to consumers to replace run-down shacks with new apartments as part of an urban redevelopment plan that gave rise to another building boom in smaller Chinese cities.
- Now, policymakers are confronting a far different landscape, forcing them to,
Local governments and businesses are saddled with more debt and less leeway to borrow heavily and spend liberally. And after decades of infrastructure investments, there isn’t as much need for another airport or bridge — the types of big projects that would spur the economy.
China’s policymakers are also handcuffed because they introduced many of the measures that precipitated the economic problems. The “zero Covid” lockdowns brought, The real estate market is reeling from the government’s measures from three years ago to curb heavy borrowing by developers, while crackdowns on the fast-growing technology industry prompted many tech firms to scale back their ambitions and the size of their work forces.
When China’s top leaders gathered in July to discuss the rapidly deteriorating economy, they did not deliver a bazooka-style spending program as some had anticipated. Coming out of the meeting, the Political Bureau of the Chinese Communist Party presented a laundry list of pronouncements — many rehashed from previous statements — without any new announcements.
It focused, however, on the need to “boost confidence,” without detailing the measures that showed policymakers were ready to do that. “Whether you have confidence in the Chinese economy is actually whether you have confidence in the Chinese government,” said Kim Yuan, who lost his job in the home decoration industry last year.
He has struggled to find another job, but he said the economy was unlikely to worsen significantly as long as the government maintained control. Source: China National Bureau of Statistics via CEIC Data By The New York Times Confronted with dwindling confidence, the government has fallen back on a familiar pattern and stopped announcing troubling economic data.
This month, China’s National Bureau of Statistics said it would figures, a closely watched indicator of the country’s economic troubles. After six straight months of rising joblessness among the country’s 16- to 24-year-olds, the agency said the collection of those figures needed “to be further improved and optimized.” The bureau this year also stopped releasing surveys of consumer confidence, among the best barometers of households’ willingness to spend.
Confidence rebounded modestly at the start of the year, but started to plummet in the spring. The government’s statistics office last announced the survey results for April, discontinuing a series it began 33 years ago. Instead of giving people less to worry about, the sudden removal of closely followed data has left some on Chinese social media,
- Laurence Pan, 27, noticed that something was beginning to go awry in 2018 when customers at the international advertising agency in Beijing where he worked started to scale back budgets.
- Over the next few years, he hopped from one agency to another, but the caution from clients around spending was the same.
He resigned from his last employer three months ago. Mr. Pan said that he had secured new jobs quickly in the past, but that he was struggling to find a position this time. He has applied for nearly 30 jobs since last month and has not received an offer.
He said he was considering part-time work at a convenience store or a fast-food restaurant to make ends meet. With so many uncertainties, he has cut back on his spending. “Everyone is having a hard time now, and they have no money to spend,” he said. “This might be the most difficult time I’ve ever been through.” The Shanghai skyline.
Consumers in China are holding back on spending, and businesses are reluctant to invest and create jobs. Credit. Alex Plavevski/EPA, via Shutterstock : A Crisis of Confidence Is Gripping China’s Economy
Is Britain still paying for ww2?
Repayment – The last payment was made on 29 December 2006 for the sum of about $83m USD (£45.5m) to the United States, and about $23.6m USD (£12m) to Canada; the 29th was chosen as it was the last working day of the year. The final payment was actually six years late, the British Government having suspended payments due in the years 1956, 1957, 1964, 1965, 1968 and 1976 because the exchange rates were seen as impractical.
Which country has lowest debt
Introduction – The debt to GDP ratio is a measure that compares a country’s total debt to its gross domestic product (GDP). It provides an indication of a nation’s ability to repay its debts relative to the size of its economy. The debt to GDP ratio can serve as a metric for evaluating a country’s fiscal health and its level of debt sustainability.
Japan has the highest debt to GDP ratio, standing at 262%. This is followed by Venezuela at 241% and Greece at 193%. These countries have been grappling with significant debt burdens for some time, with various economic and political factors contributing to their high ratios. On the other end of the spectrum, Brunei has the lowest debt to GDP ratio at 1.90%, followed by the Cayman Islands at 4.50%, Kuwait at 7.10%, and Afghanistan at 7.40%.
There are regional trends when it comes to debt to GDP ratios. Countries in Asia, particularly Japan, have some of the highest ratios, while countries in the Middle East, such as Brunei and Kuwait, tend to have lower ratios. High debt to GDP ratios in some countries can challenge their economic stability and growth prospects, as it may limit their ability to invest in infrastructure, social programs, and other development initiatives.
Why is America in debt?
The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone. Decreases in federal revenue are largely due to either a decrease in tax rates or individuals or corporations making less money.
Who does Russia owe the most money to?
Taiwan and South Korea were the latest additions on Monday and Tuesday to the Swift ban against Russia that was spearheaded by Western powers and their allies upon the country’s invasion of Ukraine. In addition to blocking key Russian banks from the international payment system, both will also participate in strategic sanctions on semiconductor exports to Russia, Reuters reports.
EU member states, the UK, the U.S., Japan and Canada already moved to ban Russian banks from Swift last week in order to limit the country’s ability to export goods and earn money to finance its war effort in Ukraine. But the move also means that Russian debtors will be unable to settle their bills at foreign banks if these are located in a country that has put Russian financial providers on the blacklist.
This chart shows the biggest outstanding amounts on residents of Russia, by country of foreign bank, (in billion U.S. dollars). Statista As seen in data by the Bank for International Settlements, the move by Taiwan can be seen as largely symbolic as exposure to claims on Russia is minimal at around $184 million.
- The amount of money Russian entities owe but could have trouble paying back is higher in South Korea at $1.7 billion and Japan at $9.6 billion.
- This puts the latter country in rank five of the most exposed to Russian debt among the 25 countries the BIS collects data on.
- Exposure to unpaid Russian debt was highest in Italy and France, where upwards of $25 billion is owed each.
In Austria and the U.S., exposure stood at $17.5 billion and $14.7 billion, respectively. One reason Austria ranks high is because one of the country’s largest banks, Raiffeisen, has a very active Russian subsidiary, which is one of the most lucrative parts of the company.
- The country also has deep business ties with Russia on energy, Der Standard reports.
- Austria, along with Germany, Italy and Hungary, was reportedly among those who opposed the Swift ban at first.
- Will the market need help? It is still unclear how big the consequences of unpaid dues from Russia will be.
Not all debts listed by the BIS were scheduled to be paid back in the immediate future. Still, Credit Suisse strategist Zoltan Pozsar compared the scenario to the failure of Lehman brothers in 2008 as well as the pandemic crunch of March 2020, when liquidity problems in the U.S.
- Market caused by a non-paying bank or non-paying banks had to be remedied by the Fed.
- As another consequence, EU and G7 countries will also not be able to send money to banned Russian banks to pay for goods or services.
- While there has been a lot of talk about whether this means that Europe won’t be able to pay for natural gas it receives from Russia, Gazprombank —which handles a lot of these payments as the financial arm of Russia’s state-owned energy company—has not yet been restricted.
However, Europe is still scrambling to source its gas outside of Russia. German Chancellor Olaf Scholz on Sunday announced plans to build two liquefied gas terminals on the country’s Northern shore in order to import natural gas from more diverse sources.
Who is Russia’s biggest trading partner
The value of total exports from Russia to its major trade partner — China — amounted to nearly 69 billion U.S. dollars in 2021.
What is Russia’s biggest source of income
What are the main parts of Russia’s economy? – Russia’s gross domestic product (GDP) is mainly composed of three sectors: agriculture, industry, and service. Agriculture contributes about 5.6% to GDP, followed by industry and service, which contribute 26.6% and 67.8%, respectively.
How much does the UK government owe in debt?
Debt is the total amount owed by the Government which has accumulated over the years. Debt is therefore a much larger sum of money. At the end of 2022/23 public sector net debt was £2,530 billion (i.e. £2.5 trillion), which is equivalent to 100% of GDP. This is equivalent to around £38,000 per person in the UK.
What does the UK owe?
1. Main points –
- UK general government gross debt was £2,436.7 billion at the end of Quarter 2 (Apr to June) 2022, equivalent to 101.9% of gross domestic product (GDP).
- UK general government deficit (or net borrowing) was £43.9 billion in Quarter 2 2022, equivalent to 7.2% of GDP.
- The general government gross debt and deficit figures published here (for 1997 onwards) are fully consistent with those in our Public sector finances, UK: August 2022 statistical bulletin, published on 21 September 2022.
! In this release, we present statistics for the general government sector. These are used for international comparisons and include central and local government only. The public sector finances release has a wider scope, adding data for other public sector bodies, including public corporations, public sector pensions and the Bank of England. Back to table of contents
Does the UK still owe money to the USA?
Decades of debt: UK’s finance chief told to make gradual pay-offs U.K. Chancellor of the Exchequer Rishi Sunak is being asked by members of the ruling Conservative party to take his time to pay off the record debt the country is racking up as it tries to weather the coronavirus pandemic.
By that, they mean decades. With the economy on course for its deepest recession for at least a century, the government is now paying the wages of more than 10 million workers to stave off mass unemployment. list of 4 items list 1 of 4 list 2 of 4 list 3 of 4 list 4 of 4 end of list The cost of such emergency measures, together with the hit to tax revenue triggered by the slump, is set to push the budget deficit to the widest since World War II, according to the Office for Budget Responsibility.
The national debt is on course to hit almost 100% of gross domestic product, a level not seen since the days of Prime Minister Harold Macmillan and the Profumo scandal. For Conservative lawmakers, a rush to cut spending and pay off the debt quickly could choke any recovery in the economy, imperiling their chances of re-election.
So the party that put the country through the biggest fiscal squeeze in peacetime after the financial crisis is coming round to the idea that the U.K. will have to live with record debt for years to come — just as a succession of governments found after 1945. “There’s talk about whether the coronavirus debt should be treated like Second World War debt, where it will sit on the national books much longer,” said Nicky Morgan, a Tory member of the House of Lords who served in Prime Minister Boris Johnson’s cabinet until February.
“I think it should.” The U.K. only paid off the last of its World War II debts to the U.S. at the end of 2006. In 2014, then Chancellor of the Exchequer George Osborne announced plans to pay off debt dating back to the South Sea Bubble of 1720, as well as World War I.
By then, those borrowings had been consolidated into perpetuals — bonds with no fixed maturity. With few in Johnson’s party advocating the sort of spending cuts deployed by David Cameron and Osborne, and the coronavirus crisis reviving questions about inequality, the government is expected to double down on its pre-virus pledge to stimulate the economy by boosting infrastructure spending.
“Nobody in their right mind is comfortable with the debt — but I certainly don’t take, as a Conservative, a view that we should not be spending money,” said Michael Fabricant, a Tory lawmaker. “It’s inevitable that we will have to live with high levels of debt for some time to come.”
Steve Baker, another Tory backbencher, told a webinar organized by the Institute of Economic Affairs that while there is a “need to think about future generations” there is little appetite for more austerity, and tax rises would be “controversial.””You just accept that you’re going to be paying off this debt in small installments for many decades to come,” David Lidington, who served as deputy to Johnson’s predecessor, Theresa May.That willingness to kick the issue into the long grass is evidence of how effective the Bank of England’s vast bond-buying plan has been in keeping borrowing costs low and stable for the government.
Even though government borrowing is far higher than it was before the financial crisis, the U.K. can still borrow for 10 years at about 0.3%, down from 5% in 2008. Gilt sales are due to total 225 billion pounds ($287 billion) between April and July, with the final total for this fiscal year set to soar well above the record set in the financial crisis.
So far, the government’s sales have met with strong demand from investors — in part because the central bank has also been buying a vast amount of gilts in the secondary market. The cost to the Treasury is the interest rate charged on the BOE reserves used to finance that buying, rather than the usual coupon payments.
That means 570 billion pounds is currently being financed at an annual rate of 0.1%, an amount that is due to hit 625 billion pounds by July and is expected to increase further. The flip-side is that debt-servicing costs are far more sensitive to changes in the BOE’s key rate.
- It would be a mistake to think that just because interest rates are low, over the very long term they’re necessarily remaining low,” Philip Hammond, who served as chancellor of the exchequer under May, told lawmakers last week.
- I personally wouldn’t be comfortable with a strategy that said we’re happy for debt to run to 100 plus percent of GDP, and just to leave it there forever.” For Stephen King, senior economic adviser at HSBC Holdings Plc, low interest rates may be the only thing counting in the U.K.’s favor, with debt levels already high and globalization slipping into reverse.
Governments, he says, only have three ways out of debt in the end: Higher inflation, something that would be unpopular with elderly savers, default — or higher taxes. “To say we’re just going get the billionaires to pay for it is a cop out,” Osborne told the Treasury Committee last week.
Where does the UK government get its money from?
The Government raises around £1 trillion in revenue each year. Most comes from the three biggest taxes: income tax, NICs and VAT.