Could the decrease in Belgian government debt-servicing costs offset increased age-related expenditure?

Abstract

This paper argues that none of the secular trends that have driven down real interest rates over the past decades is likely to reverse in the near future. Government debt-servicing costs have therefore decreased significantly and can be expected to decrease further over the coming years. We calculate the direct gains accruing to the Belgian government from lower net debt interest payments and contrast them to the projected future increases in age-related expenditures. If interest rates remain on their current levels and savings on interest payments are channelled to cover the increases in age-related expenditures, they will cover two thirds of financing needs in these areas until 2030.

Keywords

• interest rates; ageing; government debt management; risk