DESK REVIEWS | 01.03.03. Public and private debt

DESK REVIEW | 01.03.03. Public and private debt

The total public debt in Brazil (aggregating the national, state, and municipal governments) was 77.6% of the national GDP in 2018. The public debt can be separated into internal debt (approximately 70% of the GDP) and external (less than 10% of the GDP) (Central Bank of Brazil, 2019). We could not find information about private debt.

References:

Central Bank of Brazil. (2019). Estatísticas fiscais. Estatísticas fiscais. https://www.bcb.gov.br/estatisticas/estatisticasfiscais

The Centre’s debt-GDP ratio increased to 64.3% in 2020-2021 (RE) (Reserve Bank of India, 2021). Whereas household debt to GDP rose from 35.4% in the first quartile of 2020-2021 to 37.1% in the second quartile of 2020-2021 (Reserve Bank of India, 2021).

References:

Reserve Bank of India (2021). Press Releases. RBI Bulletin-March 2021. Government of India. Available from: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51299

It is estimated that public debt amounted to 28.8% of GDP in 2017 (CIA World Factbook, 2019). In Indonesia, household debt was estimated to amount to US$104 billion in 2014 (Ghose et al., 2016).

References:

CIA World Factbook. (2019). Indonesia. https://www.cia.gov/the-world-factbook/countries/indonesia/

Ghose, R., Dave, S., Shirvaikar, A., Horowitz, K., Tian, Y., Levin, J., & Ho, S. (2016). Digital Disruption: How FinTech is Forcing Banking to a Tipping Point. In Citi GPS: Global Perspectives & Solutions (Issue March). https://www.ivey.uwo.ca/media/3341211/citi-2016-fintech-report-march.pdf

National debt has been increasing since 2014 (25.65 billion dollars). In 2018, it amounted to 52.37 billion dollars and was projected to be 109.9 billion dollars in 2024 (Plecher, 2019). This is because Kenya has been relying heavily on public debt, aid and grants as a source of financing thus increasing the public debt stock and affecting private investment (Ngugi, 2016).

References:

Ngugi, W. N. (2016). Effect of Public Debt on Economic Growth in Kenya. Kenyatta University.http://erepository.uonbi.ac.ke/bitstream/handle/11295/98782/Kobey_Effect+Of+Public+Debt+On+Economic+Growth+In+Kenya.pdf?sequence=1

Plecher, H. (2019). Kenya: National debt from 2014 to 2024 (in billion U.S. dollars).

Household debt

The financial position of households[1] in Mexico has maintained a growing trend in recent years. As of June 2018, the increase registered in the last 5 years represented 5% of the GDP, with a similar growth in savings, both voluntary and mandatory. This result occurred during the same period in which the indebtedness of households also increased by 2% of the GDP, driven mainly by the expansion of credit to consumption and financial inclusion (Banco de México, 2018).

As financial inclusion increases in Mexico, household debt[2] has increased in the past decade. According to data from the Central Bank, household debt reached 16% as a proportion of Gross Domestic Product (GDP) in 2018. This represents the highest level since the beginning of recording this information in 1994. In contrast, in 2000 one of the lowest levels of household debt in recent years were reported at 8% of total GDP (Banco de México, 2018).

Regarding household debt in 2018, approximately 60% of the total financing received corresponded to mortgage loans and 40% to consumer credit. Most mortgages are granted through the two main social security institutions’ housing institutions INFONAVIT (for private sector workers) and FOVISSSTE (for public sector employees). These two institutions granted 64.9% of all mortgages, followed by banks with close to 34% of the total. In terms of total consumption and debt/credit, credit cards represent the most frequent source of consumer credit. By June 2018, 17.4 million people in Mexico had at least one credit card. This number is 3.4% higher than the number of people with at least on credit care in the same month in 2017 (Banco de México, 2018).

While household debt has increased over the past decade, it is not considered to a high risk as it is thought that this occurs in an environment where household income has improved because of real wage recovery and higher employment.

Public Debt

Between 2012 and 2018, the growth of total foreign debt, has been very important and reflects a difference of 9 percentage points of GDP, increasing from 28% to 37%. As a percentage of GDP, total external debt in 2018 is very similar to that of 1996, which was the year of the last major financial crisis experienced in the country. Of the total external debt in 2018, which amounted to 446 million US, 306.4 million USD (26% of GDP) are public external debt (publicly/government guaranteed), and 139.7 million USD (12% of GDP) are private sector external debt (not guaranteed by the government). For that same year, the level of international reserves reported by the Central Bank was 176,648.6 million USD and total revenue from exports was 450,572.2 million USD (Banco de Mexico, 2018; Secretaría de Hacienda y Crédito Público, 2018, 2019).

In terms of monetary data (balance of public debt), by end of February 2019, the Historical Balance of the Requirements of the Public Sector Finance (SHRFSP) amounted to 10,499,200,000 pesos. The internal component of the SHRFSP was located at 6,725.1 thousand million pesos, while the external component were 3,774.1 million pesos. Net debt of the federal public sector (Federal Government, State Companies, and development banking) at the end of February 2019 stood at 10 trillion 815.7 pesos.

[1] Calculated as financial assets minus received credits as proportion of GDP.

[2] Defined as the total outstanding debt of households to banks and other financial institutions as percent of GDP.

References:

Banco de México. (2018). Mercado cambiario, tipo de cambio, Banco de México.

Secretaría de Hacienda y Crédito Público. (2018). Informes sobre la situación económica, las finanzas públicas y la deuda pública. Cuarto trimestre 2018.

Secretaría de Hacienda y Crédito Público. (2019). Informes de la situación de las finanzas públicas y la deuda pública. https://www.finanzaspublicas.hacienda.gob.mx/es/Finanzas_Publicas/Informes_al_Congreso_de_la_Union