The Public Needs a Better Understanding of Public Sector Debt

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Jun 14, 2018

On June 14, 2018, the International Federation of Accountants (IFAC) posted an article by Ross Campbell, Public Sector Director of the Institute of Chartered Accountants in England and Wales (ICAEW), on how it has become increasingly standard for governments in well-developed economies to borrow to pay day-to-day operating costs—that is, deficit spending.

There is some evidence to suggest that due to structural changes in well-developed economies, the correlation between economic and tax revenue growth is not as strong as it was.

There is also a demographic impact—almost well-developed nations’ populations are aging, which presents a double impact on public finances. This means that there is a decrease in the percentage of the population actively in the workforce at the same time as an increase in the demand on public services, such as pensions, social care for the elderly, and healthcare.

Without some form of change in policy or a substantial increase in the tax revenue, social provisions on the current scale is not likely to be sustainable over the long term.

Review the full article on the IFAC's website.

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