For the Belgian government, population ageing is one of the major
challenges of the coming decades. To meet that challenge, it has developed a
strategy based on three fundamental priorities. The first is the budgetary
priority, namely reducing the public debt. A second priority is economic,
and concerns boosting the employment rate and encouraging economic activity.
The third priority concerns the sustained development of strong social
security based on solidarity.
The government strategy on fiscal policy aims to ensure the
sustainability(1) of public finances. That is
why the reduction in the debt ratio, cutting future interest charges, is one
of the main objectives. The scope thus created can then be used, among other
things, to cope with the increased expenditure on social protection. The
global financial crisis and the uncertain economic situation are the main
reasons prompting the government to accord priority to supporting economic
growth and maintaining consumer and business confidence.
With the particular aim of guaranteeing the long-term sustainability of
public finances, this stability programme devised a path which provides for
a small surplus by 2015. After that, an illustrative scenario is constructed
on that basis for coping with much of the increase in the cost of ageing
over the period 2015-2060 by reducing the primary balance without any
excessive increase in the debt ratio. The chart below presents the essential
data of that scenario, aiming at a small surplus after 2015, which will then
be gradually reduced from 2025 onwards. In the long term, small deficits
will be generated but without causing any unsustainable debt dynamics.
Chart 7
Debt ratio, financing balance and primary
balance in the long term (in % of GDP)
(1) The “Borrowing
Requirements” section defines the concept of sustainability as follows:
“Sustainability must be viewed as a situation in which, given a more or less
constant level of revenue, the government manages to absorb the impact of
demographics on part of its expenditure, without reducing the share of other
primary expenditure in GDP and without
endangering the attainment of various
targets for public finances.”
