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Glossary of terms

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Government debt

Government debt is a key indicator of the government sector's financial position. The term refers to liabilities that require a payment of interest and/or principal by the government to the creditors at a date in the future.
 
Several concepts are used to refer to the government debt on different occasions. The most meaningful is the concept of public debt that measures the cumulative amount outstanding that the government has borrowed to finance deficits. Public debt is actually sold in credit markets, therefore influences interest rates and private investment decisions.
 
Public debt instruments:
  • Securities issued by the treasury, e.g. bills, notes, bonds.
  • Savings bonds.
  • Special securities, e.g. issued to state and local administrations.
 
Public debt holders:
  • By public is meant all individuals, corporations, state or local administrations, foreign governments and other entities outside the national government.
 
Difference between government debt and deficit:
  • Deficit is the fiscal year difference between government receipts (taxes and other revenues) and outlays (government expenditure). Government deficits and surpluses are the flows that feed government debt.
  • Debt is the stock of accumulated government deficits at a given time.
 
Debt and deficit as structural indicators:
  • Government deficit and debt are key indicators of the government sector's financial position. In the European Union, they are reported to the European Commission in the framework of the Excessive Deficit Procedure. Government deficit and debt also form two of the convergence criteria for the European monetary union (EMU) nation members.
 
Maastricht debt:
  • General government gross debt according to the convergence criteria set out in the Maastricht Treaty comprises currency, bills and short-term bonds, other short-term loans and other medium- and long- term loans and bonds, defined according to ESA 95.
  • Debt is consolidated within the general government. Financial liabilities such as trade credits extended to the government are not included. Debt is valued at nominal value (face value).
  • Index-linked debt is valued at its face value adjusted by the index-related capital uplift accrued to the end of the year. Gross debt according to the Maastricht criterion differs from the SNA based general government gross financial liabilities concept of the OECD in essentially two respects.
    1. First, gross debt according to the Maastricht criterion does not include, in the terminology of the SNA, trade credits and advances.
    2. Second, there is a difference in valuation methodology in that government bonds are to be valued at nominal values according to the Maastricht definition, but at market value or at issue price plus accrued interest according to SNA rules.
 
(adapted from IMF - International Monetary Fund, Eurostat, United Nations Statistical Division, and The OECD Economic Outlook: Sources and Methods)