World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
Are Governments Overextended?
Peter S. Heller
World Economics, December 2004

Have government debt levels reached dangerous levels? Certainly, for some countries, the data would suggest so. However, this paper will argue that for many governments, the amount of explicit debt on their balance sheets seriously understates the magnitude of their future fiscal obligations. This clearly emerges from the assessment of many analysts on the size of the prospective fiscal obligations associated with aging populations. But this point is further reinforced if one examines the range of other fiscal risk exposures of governments. Thus, an examination of a government’s explicit debt should only be the starting point for assessing the sustainability of a government’s fiscal position.
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