Page 67 - economic report 2021

bond issue that matured on 2 June 2021, for the The global debt of the central government
amount of €125 million; (ii) early cancellation of cont nued to grow and passed the
the pending loan for the amount of €77.6 million
to finance road infrastructure works, maturing threshold of €1,300 million.
on 6 July 2032, and (iii) early redemption of the
bond issue of 14 October 2020, for the amount of €180 million. In total, the Government’s debt
issues in 2021 added up to €675 million.

The upward trend in the central government’s global debt continued, which had marked the
period 2002-2016 and was interrupted for only two years (2017 and 2018) before resuming in
2019. So, it reached a historic high of €1,302 million in 2021, 17.7% more than in 2020. Within the
structure of this debt is notably the increase in the outstanding balance of public debt by €370
million, to reach €1,290 million. To this is only added the line of credit of €12 million with the
Council of Europe Development Bank (CEB). The other sources of finance that the Government
had active in 2020 are no longer active.

In proportion to GDP, this debt volume represents 46.2%, 2.6 points more than in 2020. So,
exceptionally and for the second consecutive year, the debt ratio exceeded the 40% limit
established in the Law on Public Finance Sustainability for the central government, although it
does not reach the revised target established for 2021 (53.7%). Remember that this situation
derives from the special measures that the Government approved to finance the health emergency
caused by COVID-19. To deal with this deviation, the Government presented a Financial Balance
Plan to restore budget stability before the end of the 2025 budget year.

The deterioration of the public accounts is a pattern also seen by other developed economies, 65
so Andorra still has lower levels of public debt than most of the European governments. As for
the term structure of Andorran debt, in 2021, the percentage of long-term debt was reduced
to 64%, while the short-term debt increased to 36%, compared with the 79%-21% division in
2020. In this context, the IMF has expressed confidence that the consolidation process will
continue in 2022 and that fiscal discipline will help to reduce Andorra’s public debt and meet
the fiscal targets for 2023.

1.1. Revenue

In 2021, non-financial revenue settled by the Government saw an increase of 4%, contrasting
with the major decline of 9.9% suffered in 2020 due to the impact of COVID-19. So, non-financial
revenue reached the figure of €414.3 million, still far from the pre-pandemic levels. The increase
extended to all the major entries, with the sole exception of investment income which was, in fact,
the entry that rose most in 2020.

In 2021, revenue from direct More specifically, revenue from direct taxes
taxes reached a historic high. increased 33.6%, contrasting with the 0.4% fall
in 2020, to reach €117,1 million, a figure that The Andorran economy: general developments | VIII. The public sector
sets a new historic high. So, the percentage of
this chapter increased to 28.3% of total non-financial revenue – when only eleven years ago it
was practically zero – to represent 33.2% of total direct and indirect taxes, still lower than the
40% limit set by the Law on Public Finance Sustainability passed in 2014.

By tax forms, the rise in revenue from direct taxes can be explained by the positive trend of 13.1%
in personal income tax (IRPF), and also a 38.2% increase in corporate tax (IS) and 106.1% in non-
residents’ income tax (IRNR). Note that the changes relating to the increase in the IRPF on economic