ABSTRACT
The aim of this paper is to defend the viewpoint that, in the same way as the amortizations payments don’t represent part of the public sector debt, the monetary correction of the debt and other similar charges shouldn’t be considered as part of this deficit. This assertion should be even more emphasized in the case of countries with high inflation rates where expenditures with monetary indexation and other similar charges became, progressively, a bigger share of the Gross Domestic Product. Regarding to a better understanding of the Government’s real financial situation, an adjustment was done at the national account series. In this sense, and in order to work out the fiscal policy, the amount corresponding to the monetary correction was excluded from the expenditure of domestic debt charges. This meant that monetary indexation in a context of high inflation rates is better classified as principal rather than debt charge. It is important to note that this paper is based on a previous one, also by Sílvio Rodrigues Alves, entitled “O Desafio do Déficit Público”, published in Revista de Economia Política n.” 30 (April-June/1988). Afterwards, in June 1988, the same viewpoint was defended by Mr. Blezer, Mr. Tanzi and Mr. Teijeiro in the paper “The Effects of Inflation on the Measurement of Fiscal Deficits” (Occasional Paper 59, International Monetary Fund, Washington, D.C., June 1988).
KEYWORDS:
public debt; debt management; monetary correction