Debt limit
A debt limit or debt ceiling is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions.
Description
A debt limit is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. It is usually set as percentage of
Use
Several countries have debt limitation laws in place.[1][2][3]
Only Denmark and the
Limits as a percentage of GDP are more widespread.[2] Poland has a constitutional limit on public debt, set at 60% of GDP; by law, a budget cannot pass with a breach in place.[9] Examples of other countries that have debt limits as a percentage of GDP are Kenya, Malaysia, Namibia and Pakistan.[1] As part of the Maastricht Treaty, all member states of the European Union (except of United Kingdom that had a treaty opt-out from the EMU rules while being a member), have since 1992 pledged via treaty legislation and European Union law to keep their general government debt below 60% of GDP (or on a sufficiently slowly declining trajectory towards respecting the 60% limit at some point in the future) and their annual general government budget deficit below 3% of GDP (or if above it need to be corrected with a sufficiently acceptable declining speed over the following few years).[10] A revision of the EU debt rule and deficit rule is planned (also known as the Stability and Growth Pact),[11][12] although when this revision was agreed and adopted in spring 2024, it was only minor - as no changes were made to the overall treaty legislation - with changes only agreed upon to the SGP related Regulations defining how fast and flexible countries shall correct a potential excessive deficit or debt level towards respecting the treaty defined maximum 60% of GDP debt level and 3% of GDP budget deficit level in the future.[13][14][15][16]
Between 2007 and 2013, Australia had a debt ceiling, which limited how much the Australian government could borrow. The debt ceiling was contained in section 5(1) of the Commonwealth Inscribed Stock Act 1911[17] until its repeal on 10 December 2013. The statutory limit was created in 2007 by the Rudd government and set at $75 billion. It was increased in 2009 to $200 billion,[18] $250 billion in 2011 and $300 billion in May 2012. In November 2013, Treasurer Joe Hockey requested Parliament's approval for an increase in the debt limit from $300 billion to $500 billion, saying that the limit will be exhausted by mid-December 2013.[19] With the support of the Australian Greens, the Abbott government repealed the debt ceiling over the opposition of the Australian Labor Party.
See also
- Debt brake (Germany)
- List of countries by public debt
- Natural borrowing limit
References
- ^ a b c "7 Countries with Debt Ceilings or Limits". InvestmentFrontier. 8 October 2013. Archived from the original on 2 August 2021.
- ^ ISBN 9781513529561. Retrieved 19 January 2023.
- ^ "Debt Limit". United States Department of the Treasury. Retrieved 2019-06-24.
- ^ a b "Why Do Only US and Denmark Have a Debt Ceiling?". USNews. 11 October 2013. Retrieved 19 January 2023.
- ^ Alan Rappeport. (9 May 2023). "What is the debt ceiling?". New York Times website Retrieved 10 May 2023.
- ^ "What the United States could learn from Denmark". Financial Times. 26 July 2011. Retrieved 19 January 2023.
- ^ Kirkegaard, J.K. (28 July 2011). "Can a Debt Ceiling Be Sensible? The Case of Denmark II". Peterson Institute for International Economics. Retrieved 19 January 2023.
- ^ "There are (much) better ways to control US spending than a debt ceiling". Quartz. 30 September 2021. Retrieved 19 January 2023.
- ^ "The Constitution of the Republic of Poland".
- ^ "Government finance statistics". Eurostat. 20 October 2022. Retrieved 19 January 2023.
- ^ "UPDATE 2-EU debt limit of 60% no longer makes sense - ESM's Regling". Reuters. 5 May 2021. Retrieved 19 January 2023.
- ^ "Europe rethinking its rules on government debt to meet new global challenges". EuroNews. 6 April 2022. Retrieved 19 January 2023.
- ^ "EU reaches agreement on spending rules". Euractiv. 12 February 2024. Retrieved 31 March 2024.
- ^ Thomas Moller-Nielsen (12 March 2024). "Eurogroup says new fiscal rules will require public spending cuts". Euractiv. Retrieved 31 March 2024.
- ^ "Commission welcomes political agreement on a new economic governance framework fit for the future". European Commission. 10 February 2024. Retrieved 4 April 2024.
- ^ "Deal on EU economic governance reform". European Parliament. 10 February 2024. Retrieved 4 April 2024.
- ^ "Commonwealth Inscribed Stock Act 1911". Office Parliamentary Counsel. November 18, 2012 – via www.legislation.gov.au.
- ^ "Debt ceiling - all because of West Wing?". The Age. October 24, 2013.
- ^ "Debt ceiling fights ramps up". The Age. November 13, 2013.