Global debt levels reached a record $182 trillion in 2017, having grown 50 per cent in the previous decade, but the picture looks less grim when public assets are taken into account, the International Monetary Fund said on Wednesday.
The IMF said a new data base in its semi-annual Fiscal Monitor report showed considerable net worth in 31 countries that account for 61 per cent of global economic output.
Assets in these countries were worth about $101 trillion, or twice their gross domestic product, with just over half the total in public corporation assets, and just under half in natural resources such as oil or mineral wealth.
“Once governments understand the size and nature of public assets, they can start managing them more effectively,” the IMF said in the report. “Potential gains from better asset management are considerable.”
The Fund said that revenue gains from non-financial public corporations and government financial assets alone could be as high as 3 per cent of GDP a year, equivalent to the annual corporate tax collections across advanced economies.
It cited Australia, New Zealand, and Britain as countries that are taking positive steps to better manage their assets against the growth of future liabilities.
More efficient use of government-owned buildings, for example, can help reduce lease costs, the IMF said, while Britain has shifted away from inflation-linked bonds to limit the interest rate risk in the Bank of England’s bond portfolio. Pooling investment fees on various government financial assets also can improve returns for taxpayers, the report said.
The report analysed China’s public balance sheet and found that its general government net financial worth has deteriorated in recent years to about 8 per cent of GDP, largely because of subnational borrowing and underperforming public corporations.
It cited off-budget debt and weak corporate performances as risks for the future.
By contrast, it estimated that Indonesia’s increase in public infrastructure investments will boost public wealth by increasing economic output and increasing future revenues.
The report applied a stress to the US public sector assets, heavily concentrated in public pension funds, mortgages, and student loans, finding that a scenario involving a severe recession, higher long-term interest rates and rapid falls in stock and real estate prices would shrink US public net worth by an equivalent of 26 per cent of GDP by 2020.