Monetary correction of interests of the internal debt

The aim of this paper is to defend the viewpoint that, in the same way as theamortizations payments don’t represent part of the public sector debt, the monetary correctionof the debt and other similar charges shouldn’t be considered as part of this deficit. Thisassertion should be even more emphasized in the case of countries with high inflation rateswhere expenditures with monetary indexation and other similar charges became, progressively,a bigger share of the Gross Domestic Product. Regarding to a better understanding ofthe Government’s real financial situation, an adjustment was done at the national accountseries. In this sense, and in order to work out the fiscal policy, the amount corresponding tothe monetary correction was excluded from the expenditure of domestic debt charges. Thismeant that monetary indexation in a context of high inflation rates is better classified asprincipal rather than debt charge. It is important to note that this paper is based on a previousone, also by Sílvio Rodrigues Alves, entitled “O Desafio do Déficit Público”, publishedin 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 Effectsof Inflation on the Measurement of Fiscal Deficits” (Occasional Paper 59, InternationalMonetary Fund, Washington, D.C., June 1988). JEL Classification: H63