Economist Proposes Revaluing Portugal's Gold to Reduce Public Debt by €10 Billion
A strategic proposal to revalue the Bank of Portugal's gold reserves has been put forward by economist Pedro Braz Teixeira, outlining a plan to reduce the national public debt by an estimated €10 billion. The policy initiative aims to leverage the significant increase in gold prices since the country's last official valuation in 1988 to improve Portugal's fiscal position without implementing austerity measures. The objective is to deliver the full capital gain from the revaluation directly to the State for the exclusive purpose of debt amortization.
The implementation strategy would involve establishing a new, transparent rule for periodic revaluation, breaking from the ad-hoc approach of the past. Teixeira suggests basing the new valuation on the lowest annual average gold price over the past decade—a figure of €33.6 per gram recorded in 2015. This conservative methodology is designed to ensure stability and avoid accusations of fiscal imprudence. The current market price of approximately €90 per gram highlights the substantial, unrealized value held within the central bank's 382.5 tonnes of gold reserves.
This policy would primarily affect the Portuguese State by providing a significant, non-tax-based revenue stream to address its sovereign debt, which stood at 99.1% of GDP at the end of 2024. The initial €10 billion injection could be followed by further transfers in subsequent years as the valuation is updated, potentially reducing the debt-to-GDP ratio by up to five percentage points over the medium term. The plan is designed to be implemented domestically but could be discussed at the European Central Bank level, as other member states like France and Italy hold similarly large, undervalued gold reserves.
The budget for this initiative would be sourced entirely from the capital gains generated by the revaluation, requiring no new public expenditure or debt. The primary stakeholders are the Bank of Portugal, which holds the asset, and the Portuguese government, which would receive the funds. The proposal has drawn attention from financial analysts and policymakers, with figures like Mário Centeno, Governor of the Bank of Portugal, likely to be central to any formal review of the policy. The debate centers on whether the current gold price surge is a temporary bubble or a long-term trend driven by central bank diversification away from the US dollar.
The expected economic impact is a significant improvement in Portugal's sovereign risk profile, potentially leading to lower borrowing costs and increased investor confidence. A more robust fiscal position strengthens the overall economy, creating a more secure environment for both domestic and foreign investment, including in the real estate sector. The monitoring of this policy would fall to the Ministry of Finance and the Bank of Portugal, ensuring the process adheres to the established rules and its impact on the national balance sheet is transparently reported. This proposal represents a potential future policy development that could significantly alter Portugal's economic landscape. Understand policy impacts on your Portugal property plans at realestate-lisbon.com.
