Public debt - Finance and credit

3.5. Public debt

The source of repayment of state loans and interest payments on them are budgetary funds. Thus, the functioning of the mechanism of public credit leads to the emergence of public debt. The management of the state debt of the United States is carried out by its Government, control over its state and use of credit resources is assigned to the US Chamber of Accounts.

According to the US Budget Code, the state debt of the country is its debt obligations to individuals and legal entities, foreign states, international organizations and other subjects of international law, as well as obligations under state guarantees provided by the United States. State guarantees are a way of securing civil obligations, as a result of which the United States as a guarantor gives a written obligation to be responsible, in full or in part, to the person to whom the state guarantee is made.

The state debt is provided completely and without conditions to all property that is in federal ownership, which constitutes the state treasury. Thus, the quantitative and qualitative parameters of the state of the state debt, the effectiveness of its management determine the financial state of the country. This means that inefficient management of public debt can lead to its bankruptcy.

In accordance with the legislation of the United States (Article 97 of the Budget Code of the United States), the composition of the public debt includes:

o Credit agreements and contracts concluded on behalf of the United States as a borrower with credit institutions, foreign countries and international financial organizations;

o government loans carried out by issuing securities on behalf of the United States;

o agreements and agreements on the receipt by the United States of budget loans and budget credits from budgets of other levels of the budget system of the United States;

o agreements on the provision by the United States of state guarantees;

o agreements and agreements, including international ones, concluded on behalf of the United States, on the prolongation and restructuring of the debt obligations of the United States of previous years.

Debt obligations of the United States may be short-term (less than one year), medium-term (from one to five years) and long-term (from five to 30 years inclusive).

The external debt of the United States is the debt obligations of the United States in foreign currency. State external borrowing is used to cover the federal budget deficit, as well as to pay off government debt obligations of the United States.

The limits of the state internal and external debt, the limits of the country's external borrowings for the next financial year are approved by the federal law on the federal budget for the next financial year with a breakdown of the debt by forms of collateral. The increase in external borrowing is permissible in case of restructuring of external debt, leading to a reduction in the cost of its maintenance.

The list of external borrowings of the United States for the next financial year is reflected in the Program of State External Borrowings. This document is a list of all external borrowings of the country for the next fiscal year and planning period by types of borrowings, reflecting the difference between the volume of attraction and the amount of funds allocated to repay the principal debt for each type of debt obligation. The Program contains a list of external borrowings of the United States for the next financial year and the planning period with a division into unrelated (financial) and target foreign borrowings with the indication:

(1) for unrelated (financial) borrowings:

o source of attraction;

o amount borrowed;

o maturity;

(2) for targeted foreign borrowings:

o the final recipient;

o purpose of borrowing and direction of use;

o source of borrowing;

o amount borrowed;

o maturity;

o the guarantees of third parties on the return of funds to the federal budget by the final borrower, if it is provided for such a return, indicating the organization that provided the guarantee, the validity period and the scope of the obligations under the guarantee;

o Estimated amount of used funds before the beginning of the next financial year;

o Forecast of the amount of use of funds in the next financial year.

Target foreign loan (borrowing) is a form of financing projects included in the Program of State Foreign Borrowings of the United States, which provides for the provision of funds in foreign currency on a returnable and onerous basis by paying for goods, works and services in accordance with the objectives of these projects. Targeted foreign loans include related loans from foreign governments, banks and firms, as well as non-financial loans from international financial organizations.

Related loans from governments of foreign countries, banks and firms - is a form of raising funds on a refundable and onerous basis for the procurement of goods, works and services at the expense of

The funds of governments of foreign countries, banks and firms mainly in the country of the creditor.

Non-financial loans of international financial organizations are a form of raising funds on a refundable and onerous basis for procurement of goods, works and services on a competitive basis for the implementation of investment projects and structural reform projects with the participation and at the expense of international financial organizations.

The State external borrowing program should separately provide for all loans and government guarantees, the amount of which exceeds the amount equivalent to $ 10 million. USA for the entire term of the loan. These loans and government guarantees are subject to implementation only if they are approved as part of the US State Foreign Debt Program by the Federal Assembly. The volume of state external borrowings, detailed for specific loans, should be at least 85% of the total volume of foreign borrowings.

The government has the right to carry out external borrowings that are not included in the Program, if they are implemented in the process of restructuring the public external debt, as a result of which the costs for its servicing are reduced. This right extends exclusively to unrelated (financial) state external borrowings.

The US government foreign borrowing program necessarily includes agreements on loans made in previous years, if such agreements have not expired.

There are various methods for managing public debt. The management of the internal debt is mainly based on methods reflecting the unilateral participation of the state in this process. These are:

o Refinancing, i.e. repayment of old debt at the expense of funds received from the placement of new loans;

o conversion, which means a change in the yield of loans. The increase in profitability is aimed at attracting additional financial resources, reducing - to reduce the costs of servicing the public debt;

o Unification is the process of consolidating several loans into one. This process is accompanied by the exchange of old bonded loans for new ones, which leads to a reduction in the types of securities traded at the same time and a reduction in state spending;

o cancellation of the public debt, which means the state's refusal from the creditors' claims on a particular part or on the whole of the public debt.

The methods of managing external state debt are mainly based on participation in decisions taken by both parties concerned - both the borrower and the lender. These methods include:

o Refinancing, i.e. repayment of old debts at the expense of funds received from the placement of new loans. Successful application of this method requires a high financial reputation of the borrowing country. In the world financial market, the reputation of borrowers is expressed in the ratings assigned to countries by special agencies in accordance with international rating rules;

o debt restructuring. This method is expressed, first of all, in the postponement of payments on the debt for much later periods, for example, from 2 years to 10 years. The result of applying this method is a significant delay in payment for the borrower with its simultaneous growth, since an increase in the repayment period of the public debt entails the payment of additional interest.

Managing public debt requires the development of a scientifically based concept, economic justification and analytical calculations. In economically successful countries, first of all, economic expediency rests on the management of public debt, it determines the quality of public debt, its end result is social and economic development or an unbearable burden for future generations, the bankruptcy of the state.

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