China Watch Blog has learnt that Taiwan has become one of a dozen foreign debt-free countries in the world, after paying off the last batch of US$238,000 on September 15 for a foreign debt lasting 50 years, announced the Ministry of Finance.
The Taiwan Economic News reported that debt was borrowed from World Bank in 1960, mainly for purchasing dredgers, developing groundwater, and constructing tap-water facilities. The debt amounts to US$15.756 million in total, which is interest free, with a term of 40 years and grace period of 10 years.
The government started to repay the debt in 1972, once every half a year, and paid off the debt entirely with the last repayment of US$238,000 yesterday. As a result, Taiwan has muscled into the ranks of a few foreign debt-free nations in the world, including Brunei, Mongolia, and Macao.
During the early stage of Taiwan’s economic development, the government borrowed heavily from abroad, such as from the U.S. and Saudi Arabia, to fund major construction projects. It began to wean itself from foreign debt in 1970s, thanks to economic takeoff which generated abundant tax revenue for the government.
Tseng Ming-tsung, vice finance minister, pointed out that in the future, the government will tap domestic idle fund, which topped NT$1.1 trillion last year, for funding public construction projects.
While Taiwan has been free of foreign debt, the government, however, is still mired in internal debt. As of the end of August 2011, the central government had incurred outstanding debt of NT$4.6 trillion. The Executive Yuan (the Cabinet) resolved to borrow debt of NT$286.7 billion next year, which will boost the outstanding debt past the NT$5 trillion mark, reaching NT$5.18 trillion, equivalent to 37.3% of the average GNP in the past three years, only one step away from the legal debt ceiling of 40%.
Tseng Ming-tsung, however, remarked that the share of government deficit in GDP has been on decline, thanks to the expansion of GDP and the decline in debt amount. The deficit of the central government’s general budget and special budget will reach 1.6% of GDP next year, compared with the peak level of 3.5% during the global financial tsunami in 2009.