In 2023, France will have its fifth public finance programming law (PFPL), which will set out a path for debt reduction by 2027. While these programming laws represent a step forward in the medium-term management of public finances, it has to be said that the public debt ratio targets set out in them have so far not been achieved. While each of the previous PFPL forecast a fall in the public debt ratio relative to its level at the start of the period, the weight of public debt has increased significantly compared with 2009, the first year covered by the first PFPL.
It is therefore useful to draw lessons from the medium-term projections carried out to date in France. The purpose of this note is to identify the sources of the observed gaps between the public debt ratio targets set out in three public finance programming laws (2012-2017, 2014-2019 and 2018-2022) and their outcome.
To this end, the note distinguishes the impact of macroeconomic factors, assessed through the difference between the apparent interest rate and the rate of growth of nominal GDP, the ratios of primary public expenditure and public revenue to GDP, and the impact of stock-flow adjustments.
Despite an interest expenditure that was systematically more contained than expected, the target for the public debt ratio set at the end of the programming period was always exceeded, due to nominal GDP growth that fell short of expectations and a target for the ratio of primary public spending excluding tax credits that was constantly missed, with the ratio of public revenue net of tax credits to GDP and stock-flow adjustments playing a role that was sometimes upward, sometimes downward.
Compliance with the objectives set out in the medium-term fiscal-structural plan, which has already revised upwards the debt and expenditure ratio objectives for the horizon of the current PFPL and is once again based on an effective growth scenario considered optimistic by the High Council and a significant reduction in the expenditure ratio, will therefore require a clear break with the past, particularly in terms of method.