Re: Creative accounting
Look here. 53% debt to G.D.P. ratio is actually quite healthy compared to other countries. By comparison, the United States has a debt to G.D.P. ratio of over 100% and Japan has a ratio of 227%.
The usual retort is “oh but those countries are richer and can pay off their debt”. So my question is why haven’t they?
American debt has been hovering at 100% for about 30 years.
The reality is the debt itself is not the issue. It is the ability to pay off the debt. The debt-servicing figure. An analysis needs to be done on foreign reserves and the debt servicing figures.
The debt to G.D.P. ratio doesn’t really tell us anything other than exactly that - the ratio of debt to that country’s G.D.P.
Samoa’s G.D.P. is about 2 billion per year so that if our overall debt (not debt per year, but overall total debt accumulated over 30 years or so) is $1.1 billion, then that is how the figure of 53% is arrived at.
However, it is always good to get the ratio down to under 50%.
New Zealand is actually a good example to follow. Their debt to G.D.P. ratio is 20%. Back when Helen Clark was PM it was around 17%.