Definition
Off-Budget Borrowing
Off-budget borrowing is debt raised by public sector entities on behalf of the government that does not appear in the headline fiscal deficit.
Governments sometimes route borrowing through PSUs, special funds or food and fertiliser agencies so the liability sits outside the Budget's reported numbers, understating the true fiscal deficit. Such off-budget borrowing still has to be serviced eventually from the Budget, so it merely defers rather than avoids the cost.
The CAG and economists have repeatedly flagged the practice for reducing transparency. In recent years the government has moved to bring much of this borrowing back on-budget, accepting a higher reported deficit in exchange for a more honest picture of public finances.
Related terms
- Fiscal DeficitThe fiscal deficit is the gap between the government's total spending and its total revenue, showing how much it must borrow in a year.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.