Independent Scotland would face immediate $38.52 billion debt: report

Tue Apr 8, 2014 8:16pm EDT

First Minister of Scotland Alex Salmond looks on during an interview with Reuters in New York, April 4, 2014. REUTERS/Brendan McDermid

First Minister of Scotland Alex Salmond looks on during an interview with Reuters in New York, April 4, 2014.

Credit: Reuters/Brendan McDermid

(Reuters) - An independent Scotland would face an immediate debt repayment of 23 billion pounds ($38.52 billion) to the UK Treasury, British media reported, citing a leading economics research body's estimate.

According to newspapers including The Guardian, The Telegraph and The Times, The National Institute for Economics and Social Research (NIESR) has warned that Scotland would have to borrow 23 billion pounds in its first year of independence, at interest rates of up to 1.65 percent higher than the UK Treasury's rates. (link.reuters.com/syx38v)

In September Scotland will hold an referendum on whether to sever its 307-year tie with England, with Scottish nationalists arguing that a split would give them greater economic freedom.

The newspapers quoted NIESR's macro-economist Angus Armstrong as saying that the calculations were based on the Scottish government's promise after independence to repay its share of UK debt, which is expected to hit 1.7 trillion pound by 2015-16.

The NIESR said that Scotland would need to make extra spending cuts above those planned by the UK government of nearly 1 percent of GDP owing to declining oil revenues, in order to meet the Maastricht target of getting national debt down to 60 percent of GDP within 10 years, according to media reports.

Based on NIESR's data, Scotland's 84 percent geographical share of North Sea oil and gas receipts would not cover that debt.

The Guardian reported a Scottish government spokeswoman as saying that Scotland would still end up with a lower debt-to-GDP ratio than the UK, and any deal on debt must also include "a fair share of the assets of the current UK".

The spokeswoman said the NIESR's analysis was mistaken.

According to The Guardian the spokeswoman said that the findings "misunderstand how government debt works and reflects short-term borrowing not long-term debt repayments."

"The people of Scotland already pay their share of UK debts through taxes every year and any debt repayments to be made by an independent Scotland will be agreed as part of a fair negotiation over assets and liabilities," she added. ($1 = 0.5970 British pound)

(Reporting by Aashika Jain in Bangalore; Editing by Eric Walsh)

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