The Council of Economic Planning and Development (
The CEPD's preliminary report said raising the debt level would create domestic demand and stimulate economic development.
There are two ways to finance the debt, through either domestic or foreign borrowing. Chen Po-chih (
"First of all, it is clear that, with the already stringent finance, the government needs to raise money to cope with earthquake losses," he said, "and banks buying government bonds has certain merits."
"Banks, by buying government assets, are increasing their assets," Chen said. "If banks lend money to the government, the issue of problematic loans in the financial market can also be alleviated."
In other words, with less money in their coffers, the banks would be more careful in giving out loans.
When asked whether raising debt would promote economic development, Chen stressed that "it is very important to have appropriate ways of spending," indicating the effect of raising debt depends on how the government uses it.
"First of all," he said, "there has to be a reasonable standard for giving money to people who were hurt in the earthquake."
People should get support appropriate to their needs, he added, instead of using one standard across the board.
As an example Chen suggested: "If a house worth NT$3 million in Taichung was destroyed, and the government gave the owners NT$1 million in compensation, that doesn't mean that the government has to give NT$10 million to the owner of of a NT$30 million building that collapsed in Taipei."
This is because the latter, who is richer, has the ability to recover with less government compensation, so the government can concentrate on allocating its resources to the areas that need help the most.
Moreover, Chen said, because money is needed everywhere after the earthquake, it is easy to squander the funds. "Reconstruction is different from providing aid," he said.
"We have to be more cautious and not let politicians allocate resources based on their own personal agenda," he said, "evaluation has to be done, before spending the money raised."
As an example, Chen mentioned rebuilding bridges: "Whether the destroyed bridge needs to be rebuilt at its original location, or moved to another location, spending the same amount of money can create different effects."
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