State debt burden increases to 39.5 billion in 2022

The Ifrap Le Figaro rating

By an amendment considered in second deliberation of article 19 of the 2022 finance bill in the National Assembly, the government modified the State budget deficit which went to -155.13 billion euros against -143 , 38 billion euros initially included in the 2022 PLF, partly due to additional expenditure.

These expenses include 1.1 billion euros related to the upward revision of the debt burden of the State scheduled for 2022. Due to the growth of the deficit, the financing need of France is increasing. from 293 billion euros for 2022 to 302 billion euros.

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Indeed, Agence France Trésor specifies on its website that "

 " while the initial forecast was 38.4 billion for 2022. On this same scope, the Amending Finance Law (2) 2021 also revises upwards the State debt charge for 2021 to 38.2 billion euros. The fiscal burden of government debt is therefore increasing very rapidly under the effect of inflation.

We are no longer in the days when France could borrow more and more debt while always paying less at least on the budgetary level, before this increase is reflected in national accounts.

And yet we are still borrowing at rates close to 0 (0.11% at 10 years on November 15).

It should be emphasized: the budgetary debt burden increased in 2021 by 1.4 billion euros and by +3.3 billion between 2020 and 2022.

An error that could weigh heavily

The reason for this increase is certainly to be found in the increase in the financing requirement linked to new spending but also in the acceleration of inflation which increases the interest charge on indexed government securities, i.e. - say, the rate of which increases when market rates rise (229 billion euros at the end of September 2021 on an outstanding negotiable debt of 2.148 billion euros or 10.66% all maturities).

Inflation can therefore have a significant effect on the annual cost of public debt.

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The lack of desensitization of the State's negotiable public debt to the risk of inflation is currently weighing heavily on the increase in the budgetary burden of servicing the public debt. But given that in national accounts (Maastrichian), the latter continues to decline faceally through accounting methods, the executive does not feel in a hurry to amortize the indexed debt as a priority. It seems to us that this is an error that could weigh heavily in the future if the surge in inflation is not temporary.

As already noted in its associated opinion on the amending finance law for 2021 and the finance law for 2022 the High Council of Public Finance on October 29, 2021, “

 The budgetary burden of the State debt for 2022 could therefore exceed 39.5 billion euros in execution.