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MOF dismisses bankruptcy fears

The Ministry of Finance yesterday denied a Chinese-language newspaper report that said the IMF had warned the government that it could face bankruptcy if hit by a natural disaster or economic crisis.

While the central government's outstanding debt stood at NT$3.4 trillion as of last month, or 33.4 percent of GDP, the number hasn't exceed the 40 percent debt-raising ceiling stipulated by laws, the National Property Bureau said in a statement.

The bureau said the country's 33.4 percent governmental debt is relatively small compared to other countries, noting that the rate for the US was 34.6 percent, while Japan's was 106.5 percent and the UK was 49.9 percent.

While the government's fixed revenue incomes, such as taxes, were restricted by the economic recession to between 12 percent and 14 percent of GDP, the government has had no problem allocating and implementing annual budgets yet, the bureau said.

According to the newspaper report, the IMF said that if the government continues to run deficits every year, coupled with a steadily graying population -- meaning fewer people paying taxes and more receiving welfare benefits -- the government could face financial collapse if struck by a natural disaster or an economic crisis.

For any emerging government whose outstanding deficits reach 34 percent, an 8.5 percent economic growth rate would be required to offset the governmental liabilities, according to the fund.

The government has predicted a 3.06 percent growth rate for this year, compared to 3.59 percent last year.

In responding to lawmakers' questions about the government's financial difficulties, Premier Yu Shyi-kun told the Legislative Yuan yesterday that the administration had set a goal of achieving a balanced budget in five to 10 years.

During an interpellation ses-sion, Chinese Nationalist Party (KMT) Legislator Lee Chuan-chiao (李全教) said that the government had a NT$800 billion deficit between 2001 and this year, so he wondered if it were possible to achieve a balanced budget.

Minster of Finance Lin Chuan (林全) replied that a reform plan, approved by the Cabinet, had been implemented and that it would be reviewed every two years. He said there was a good chance that a balanced budget could be achieved in just eight or nine years.

Yu said the increase in the deficit is not as serious as the newspaper claimed, noting that the deficit was a little more than NT$2.3 trillion for 2000 and that it only rose about NT$1 trillion over a period of four years.

If the interest payment of NT$500 billion and other unforeseen expenditures, such as those for the SARS outbreak, are excluded, then the deficit only amounts to about NT$40 billion a year, Yu said.

He said that the NT$20 billion public works project to stimulate employment has paid off, noting that the jobless rate for August had dropped to 5.21 percent from 5.35 percent in August last year.
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