When assessing the development of general government debt, it is worth taking into account both the actual government debt and the development of net debt. This means taking into account part of the assets of both the central government and other general government. The examination of net debt has become increasingly important in recent years.
The audit examined whether the forecast by the Economics Department of the Ministry of Finance of the development of government debt in the next few years has been prepared using appropriate methods. In addition to obtaining verifying information, the aim of the audit was to increase information on what government debt is and what factors affect its development.
General government debt has been increasing rapidly. The forecast of the development of government debt is an important estimate in view of fiscal policy as a whole, and it may influence the fiscal policy orientation The audit supplements the National Audit Office’s previous assessments of fiscal forecasts. The audit covers such factors affecting government debt whose forecasts have not been audited previously.
Based on the audit, the process used by the Economics Department for preparing government debt forecasts functions well, and the methods used are, in general, up to date and sufficiently accurate. However, the audit found that the process for preparing the forecasts was partly vulnerable to risks, and the forecasting methods should be updated in some areas. In addition, the National Audit Office recommends that the Ministry of Finance should update and expand the methodological description of its forecast.
It is an established practice to measure government debt using the concept of gross debt. This is a practice that complies with legislation and fiscal rules and will continue to affect the limits on the development of general government debt in Finland. However, the data on gross debt does not take into account the fact that assets partly function as a counterpart of debt. In recent years, the variation in the amount of assets has been high, and the importance of assets has increased. When examining general government debt, it would therefore also be important to examine net debt, which takes the financial assets of both the central government and the local government into account as a debt-reducing item. However, the use of a net debt indicator does not change the overall picture of the development of general government debt.
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