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State Reduces Debt Stock

Bhubaneswar: The State Government has been able to reduce the debt stock from 50.7% of GSDP in 2002-03 to below the prudential level as recommended by the 13th Finance Commission and prescribed in Odisha Fiscal Responsibility and Budget Management (OFRBM) Act, 2005.

Vishal Dev, Principal Secretary Finance has reviewed ‘Debt Stock Scenario’ in the State and it came to light that the ratio of interest payment to revenue receipt (IP/RR) ratio, which should be within the prudential level of 15%, has also been achieved and consistently maintained.

Strong fiscal performance of the State by fulfilling these criteria gives the state an additional fiscal space over the prescribed fiscal deficit 3% of GSDP.

Department of Finance sources said that the public debt raised by the Government of Odisha is fully utilized for capital investment. Whilst the total stock of debts is increasing over time, the public debt of Odisha is sustainable, meaning that the Government can service its debts without difficulty.

Officials sources said that strong revenue growth is helping to keep interest payments manageable, and within the limits of the FRBM Act. The low percentage of foreign currency debts has lowered Odisha’s vulnerability to any exchange rate depreciation.

It is worth noting that Odisha’s debt to GSDP ratio of 12.7% as per revised estimate of FY 2022-23 is considerably lower than that of the Central Government which is 57% of GDP as per the Union Budget.

The State Government’s total loan burden stood at nearly Rs 87,000 crore by the end of January 2023, which is 11.5 per cent of the GSDP, Finance Department officials said.

It is estimated that the debt stock will increase to Rs 97037 crore which is 12.7% of the State’s Gross Domestic Product (GSDP).

The open market borrowing stood at Rs 24,058.07 crore. As per 2022-23(RE), the share of Open market borrowing in total debt of the State is around 24.8%. The share of the open market borrowing has gone down from 30% in FY 2021-22 to 24.8% in FY 2022-23 and is expected to decrease further in the coming financial year.

The State Government didn’t resort to the open market during FY 2022-23 because the required amount was financed through the cash balance available in the Public Accounts and from other cheaper sources such as OMBADC and CAMPA.

In the medium term, the total debt to GSDP ratio of the State is projected to reach to a level of 16.7% in the financial year 2026-27, which will be within the stipulated limit of 25%.

For FY 2023-24, it is estimated that the total debt stock will be Rs. 1,12,882 crore which is 13.1% of GSDP.

The fiscal deficit stands at 2.8% of GSDP and the interest payment to revenue receipts (IPRR) stands at 4.3% for the financial year 2022-23, well within the limit of 15% set by the FRBM Act.

As per the budget estimate for FY 2023-24, fiscal deficit and IPRR are estimated to be 3.0 % and 3.9% respectively.