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Measures for maintaining fiscal stability

I. The establishment of multiple financial resource channels

1.Maintaining fiscal stability is the foundation of sustainable development for a nation and a long-term objective for our government. In response to policy demands and the promotion of infrastructure projects, the Ministry of Finance manages the national financial resources and has established multiple channels to raise funds adequately. With the measures of resource-broadening and cost-cutting at all levels of our government, the deficit of the Central Government General Budget and Special Budgets decreased to NT$13.6 billion in 2017, falling from NT$228.6 billion in 2012. Moreover, thanks to the outstanding performance of the Central Government General Budget, there were surpluses of NT$16.5 billion and NT$16.0 billion in our annual budget in 2018 and 2019, respectively. These surpluses were gained despite the introduction of the Forward-Looking Infrastructure special budget, which we funded for promoting national infrastructure.

2.In 2020 and 2021, in order to maintain economic growth momentum, safeguard national security, and respond to COVID-19, we have funded and expanded special budgets, leading to the growth of the deficit. The annual deficit was expected to be NT$695.9 billion in 2021. Thanks to the outperformance of tax revenues collection in 2021, it is estimated that the deficit (including of Central Government General Budget and Special Budgets) will be reduced significantly in the final account. In addition, as the COVID-19 pandemic subsides and the pandemic-related special budget will be terminated at the end of June 2022. At the same time, and the growth rate of annual revenues is higher than that of annual expenditures in the 2022 Central Government General Budget, the deficit in 2022 is also expected to reduce.

II. Debt ratio management

In recent years, the fiscal situation of the Central Government has been improved gradually. The ratio of outstanding debt with a maturity of 1 year or more incurred by the Central Government to the average of nominal GDP for the previous 3 years has decreased from a peak of 36.3% in 2012 to 29.6% in 2019, showing a 7-year successive decline. However, in response to COVID-19 we funded the special budget by borrowing NT$291.5 billion and NT$430.4 billion in 2020 and 2021, respectively. Combined with the amount of the Central Government General Budget and all of the ongoing special budgets, the debt to GDP ratio slightly increased to 30.1% in 2020 and 33.5% in 2021(29.7% and 29.9% if calculated with the year-end actual amounts). This ratio is projected to be 32.8% in the 2022 Central Government General Budget (29.0% if calculated with the actual amount as of the end of February of the same year). Due to the fact that the annual revenues in 2021 have surpassed expectations, no debt was incurred in the general budget, and the amount of principal repayment has also been increased, the debt-to-GDP ratios in 2021 and 2022 are expected to drop further, showing the effectiveness of government debt management. In the future, we will continue to manage debt in a way compliant with The Budget Act, The Public Debt Act, and The Fiscal Discipline Act so as to maintain fiscal stability.

III.International analysis

1. Debt management is reasonable in our country
Our central government's debts that mature in more than one year as a percentage of GDP were 28.18% in fiscal year 2019, 27.97% in fiscal year 2020, and 29.38% in fiscal year 2021. Compared to the United States'119.01%(2020), Great Britain's 103.50%(2020), Germany's 44.93%(2020), and Japan's 221.07%(2020), our government debt management appears stable and reasonable.

2. International credit evaluation agencies have given our nation high evaluations

(1)In order to achieve the goals of economic growth and sustainable financial development, we have been promoting relevant measures, such as restructuring expenditures and establishing multiple channels for the cultivation of financial resources, so as to further shrink our deficit as well as control the scale of our debt. The World Economic Forum (WEF) announced in "The Global Competitiveness Report 2019" that Taiwan ranks 12th of the 141 economies rated. In "Debt dynamics," under the category of "Macroeconomic stability," Taiwan tied for first place with 33 other economies. According to the “World Competitiveness Yearbook 2021,” which was released by the Institute for Management Development (IMD) in Switzerland, Taiwan ranked 8th among 64 rated economies, moving up 3 places compared to the previous year, and ranked 3rd in the Asia-Pacific region. 

(2)Moody's Investors Service on February 24th, 2021 affirmed Taiwan’s long-term issuer rating at “Aa3” and changed the outlook to “positive” from “stable”. Standard & Poor's Global Ratings on April 22th, 2021 raised the long-term issuer credit rating on Taiwan to “AA” from “AA-,” a positive outlook. Fitch Ratings on September 10th, 2021 upgrades Taiwan’s long-term foreign-currency Issuer Default Rating and Country Ceiling to “AA” and “AAA” from “AA-“ and ‘”A+”, a stable outlook. The above international credit evaluation agencies have affirmed Taiwan’s excellent fiscal performance by demonstrating a prompt and effective economic recovery in the pandemic while abiding by the relevant loan-cap fiscal rules stipulated in The Public Debt Act, effectively assuring a rapid economic revitalization back to its normal track amid the pandemic and showing that Taiwan has a more resilient fiscal capacity than many of its Aa-rated peers when faced with unforeseen sudden impacts.

Issued:Dept. of Planning Release date:2022-03-31 Last updated:2022-03-31 Click times:1037